To explore the rationale for specialization, economists use the
A) marginal principle.
B) principle of opportunity cost.
C) real-nominal principle.
D) principle of marginal exchange.

Question

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The principle of opportunity cost states that the cost of any activity is the forgone opportunity of the next best alternative. Using this principle, economists can explain why specialization is beneficial. Each individual or region can specialize in producing the goods or services that have a lower opportunity cost for them, meaning that they are giving up less by producing those goods or services rather than others. This results in increased efficiency and productivity, leading to economic growth and higher living standards.

To Explore the Rationale for Specialization, Economists Use the