In a two-person,two-good economy,the benefits of labour specialization will be larger when
A) one person has an absolute advantage in both goods.
B) neither person has an absolute advantage.
C) both persons have identical absolute advantages.
D) the difference in their respective opportunity costs is large.
E) the difference in their respective opportunity costs is small.

Question

Quizplus · Accepted Answer

Labour specialization leads to increased efficiency and productivity when the opportunity cost of producing a good is lower for one person compared to the other. Therefore, the benefits of labor specialization will be larger when the difference in the opportunity costs of the two persons is large, making it more advantageous for one person to specialize in producing one good while the other person specializes in producing the other good.

In a Two-Person,two-Good Economy,the Benefits of Labour Specialization Will Be