Chapter 2, Problem 2.4P

To determine

Various examples of specialized market or retail outlets and the factors that make the web favorable to specialization.

Concept Introduction:

Specialization means being able to produce certain limited types of goods and services but at a lower cost and with greater productive efficiency. Absolute advantage is the ability to make certain goods and services at a lower cost compared to other producers. Comparative advantage is to make certain goods and services at a lower opportunity costs than other producers do. While absolute advantage depends on the superiority in the production in production capabilities, the comparative advantage depends on the loss of benefits from not choosing to produce the alternative good. Absolute advantage is comparison in production of same goods with other countries, whereas comparative advantage is the comparison with opportunity cost of production of different goods in the same country with other countries. Comparative advantage is more beneficial to the economies. However, the quotas and tariffs reduce the comparative advantage not allowing efficient use of resources in producing the good that gives highest returns.