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.
Specialization based on comparative advantage allows a greater quantity of goods and services to be produced. D. Economic Coordination and the Market System 1. Coordination of economic activity in a market system relies on voluntary exchange. Voluntary exchange occurs when all parties to the exchange expect to benefit. There are several conditions that must hold if trade is to be voluntary.