A. Basic Questions Answered by a Market System 1. A market system answers at least five questions. B. The Division of Labor 1. Division of labor implies specialization of economic activity. Division and specialization of labor results in greater levels of output.
Division of labor can result in overspecialization.
Worker discontent can ensue because workers may perform monotonous tasks. C. Comparative Advantage and Specialization 1. An individual has an absolute advantage in production when, given time and resources, they can produce more of a product than another individual. An individual has a comparative advantage when they can produce a good at a lower opportunity cost than another person. Opportunity cost is the value of the best alternative given up to engage in an action.