When people specialize in the activity in which they have a comparative advantage,
A)there cannot be a division of labor, though production will increase.
B)there will likely be a division of labor as well as an increase in output.
C)there will be a gain from trade, but production will not be increased.
D)there will likely be a division of labor, and output will stay the same.
E)there will likely be a division of labor, and output will decline.

Question

Quizplus · Accepted Answer

When people specialize in the activity in which they have a comparative advantage, there will likely be a division of labor as well as an increase in output. This is because by specializing in their comparative advantage, individuals are able to produce more efficiently than if they were trying to produce everything themselves. This allows for the benefits of the division of labor to be realized, leading to increased productivity and output. Furthermore, by trading with others who specialize in different activities, individuals can gain access to a wider range of goods and services and increase overall welfare through gains from trade.

When People Specialize in the Activity in Which They Have