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Chapter 2: Problem 8

What factors underlie whether specialization in production will be partial or complete on an international basis?

Short Answer

Expert verified
Several factors can determine if specialization will be partial or complete on an international basis. These include a country's comparative advantage related to its natural resources, labor skills, technology, government policies, and international trade agreements. Complete specialization usually happens when a nation has an overwhelming advantage in producing a particular good while partial specialization occurs when the advantages are distributed across several types of goods.

Step by step solution

01

Identifying Specialization

Specialization is a method of production where a nation or an individual concentrates its resources on producing a limited variety of goods, using fewer resources. In this regard, they gain efficiency and productivity.
02

Understanding Complete Specialization

Complete specialization happens when a nation or company focuses all its productive resources on one type of goods or service. It occurs when a country has a significant comparative advantage in producing a certain good or service. This advantage could be a result of several characteristics including rich natural resources, competent labor force, advanced technology, etc. It can also be influenced by the trade policies of the country.
03

Understanding Partial Specialization

Partial specialization happens when a country does not completely specialize, and instead produces several varieties of goods. This can happen when a country has a comparative advantage in several types of goods or services. Resource distribution, government policies, international trade agreements, labor skills, and technological advancements can all influence this.

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Most popular questions from this chapter

Identify the basic questions with which modern trade theory is concerned.

With a given level of world resources, international trade may bring about an increase in total world output. Explain.

The gains from specialization and trade are discussed in terms of production gains and consumption gains. What do these terms mean?

How did Smith's views on international trade differ from those of the mercantilists?

Develop an arithmetic example that illustrates how a nation could have an absolute disadvantage in the production of two goods and still have a comparative advantage in the production of one of them.
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