A main advantage of specialization results from:
|a. Economics of large scale production
b. The specializing country behaving as a monopoly
c. Smaller production runs resulting in lower unit costs.
d. High wages paid to foreign workers
The Correct Answer Is:
a. Economics of large scale production
One of the main advantages of specialization is derived from the economics of large scale production (Option a). When a country or a firm specializes in producing a particular type of good or service, they can focus all their resources, technology, and expertise on that specific area.
This leads to an increase in production efficiency and effectiveness, which results in lower average costs per unit.
Explanation in Detail: Economics of Large Scale Production
When a country or a firm specializes, they can achieve economies of scale. This means that as production increases, the average cost per unit decreases. This occurs because fixed costs (like machinery, infrastructure, etc.) can be spread out over a larger number of units, making each unit less expensive to produce.
For example, a factory that produces 10,000 units of a product will have lower average costs per unit compared to a factory producing only 1,000 units of the same product.
Moreover, specialized production allows for the adoption of advanced technologies and production techniques that are specific to that particular industry. This can lead to further cost reductions and increased efficiency.
Additionally, specialized firms can benefit from specialized knowledge and expertise in their chosen field, which can lead to further improvements in productivity and quality.
In international trade, countries often specialize in producing goods or services that they have a comparative advantage in. This means they can produce that particular good or service more efficiently and at a lower opportunity cost compared to other countries.
By focusing on what they can produce most efficiently, countries can participate in global trade and benefit from the principle of comparative advantage.
Explanation of Incorrect Options:
In conclusion, the main advantage of specialization stems from the economics of large scale production. By concentrating resources and expertise on a specific area, countries and firms can achieve economies of scale, leading to lower average costs per unit. This results in increased efficiency and competitiveness in the global market
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