Another economist, Paul Krugman, noted widening gaps not only between but also within countries. Krugman focused on economic processes like economies of scale to explain the concentration of economic activity in certain areas of a country. However, Krugman s models show that the process may be self-correcting. Sachs and Gallup s findings suggest that policies such as deregulation and free trade advocated by the World Bank cannot be completely effective. Krugman s arguments suggest that there is a role for economic planning as a means of boosting a country s economy.
Questions Explain the terms division of labor and economic specialization.
Using a production-possibility curve illustrate the impact of an improvement in technology. Illustrate the possible advantage that a country might gain from trade.