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Author Question: What are the gains from specialization and trade? What will be an ideal ... (Read 56 times)

debasdf

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on: Jun 29, 2018
What are the gains from specialization and trade?
 
  What will be an ideal response?

Question 2

Is it possible for the average fixed cost curve to have the shape depicted above? Explain.
 
  What will be an ideal response?


succesfull

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Reply #1 on: Jun 29, 2018
Answer to Question 1

From society's standpoint, the total output of goods and services available for consumption is greater with specialization and trade. From an individual's perspective, each person who specializes enjoys being able to consume a larger bundle of goods and services after trading with others who have also specialized, than would otherwise be possible under self-sufficiency. These increases are the gains from specialization and trade for society and for individuals.

Answer to Question 2

Average fixed costs are equal to the total fixed costs divided by output. Mathematically speaking this figure will continue to fall since the number in the numerator remains fixed while the number in the numerator rises. Therefore, it isn't possible for the average fixed cost curve to have the shape that is depicted in this graph


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