Why is specialization so advantageous to trade? I. Through specialization, people and firms can achieve economies of scale. II. Through specialization, people and firms can use specialized machinery and techniques. III. Trade exists only between people and firms that have complete specialization in the goods they are best at producing.
A) I only
B) I, II, and III
C) I and III only
D) I and II only

Question

Quizplus · Accepted Answer

Through specialization, people and firms can use specialized machinery and techniques (II), and achieve economies of scale (I). However, trade does not exist only between people and firms with complete specialization in the goods they are best at producing (III), as comparative advantage allows for trade even when one party is not fully specialized in a particular good.

Why Is Specialization So Advantageous to Trade? I