Chapter 18.1, Problem 3R

To determine

To discuss: The importance of specialization to a country.

Explanation of Solution

Specialization refers to the situation when a country produces more of goods it has specialization in and export it to other countries. This makes specialization profitable for the country.

For example, Country A has specialization in producing good A at lower costs than producing good B. If specialization is followed, company A will allocate all of its resources to produce more of good A and trade to other countries. They may trade some for good B as well.

Therefore, the country benefits from producing more of good that can be produced at lower cost and export it to other countries.