Asked by Allan Gazcon on May 06, 2024
Verified
With constant costs in production, specialization tends to proceed to complete specialization, but with increasing costs, specialization will not be complete.
Constant Costs
Costs that do not change with the level of output production, remaining stable over a certain range of production.
Increasing Costs
A scenario where the costs of producing goods or services trend upwards over time, affecting profitability and pricing strategies.
- Identify the function of opportunity costs in deciding specialization and trade configurations.
Verified Answer
AJ
alezandra jordanMay 09, 2024
Final Answer :
True
Explanation :
When there are constant costs in production, complete specialization becomes more efficient and profitable. However, when there are increasing costs, it may not be cost-effective to specialize in only one area, and firms may choose to diversify their production to mitigate those costs.
Learning Objectives
- Identify the function of opportunity costs in deciding specialization and trade configurations.
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