Related subjects are \"Division of Labor, Comparitive Advantage, Capitalism, and
ID: 1093253 • Letter: R
Question
Related subjects are "Division of Labor, Comparitive Advantage, Capitalism, and etc..."
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1. Specialization has led to individuals to purchase most goods in the market. Why do we divide the production process among many different workers? Why do we purchase some goods while producing others ourselves?
2. Can we use the same explanation for both types of division of labor?
3. Does the voluntary choice of exchanges through markets mean that we should never regulate market outcomes? Could people make free choices that are not in the general interest? Give arguments for and against government regulation
Explanation / Answer
1. Specialization has led to individuals to purchase most goods in the market. Why do we divide the production process among many different workers?
Because when the process is specialized productivity tends to increase. The person or company becomes an expert in that area and can be much more efficient than trying to do everything.
Why do we purchase some goods while producing others ourselves?
It is a decision based on opportunity cost and money. We generally ask ourselves can we produce it ourselves for less? Also, is the time and labor it takes to produce it better than the amount of time and labor we could spend doing something else that is a core competency? These things are evaluated when making a decision.
2. Can we use the same explanation for both types of division of labor?
Yes, to some degree. The competitive forces and decision making is very similar for both specialized in general labor. At the same time, their are differences in the cost and availability of specialization in certain fields or product lines.
3. Does the voluntary choice of exchanges through markets mean that we should never regulate market outcomes?
Absolutely not. Some regulation is still and always will be necessary. I do think this means there could be less regularion though.
Could people make free choices that are not in the general interest? Give arguments for and against government regulation.
Of course people can make bad decisions that are not in their general interest. It happens all the time and probably to ourselves more often than we care to acknowledge or admit.
For government regulation - It helps (or tries to help) protect people from making bad decisions that cost money, safety, death etc.
Against government regulation - It can be inefficient, cost more, take more time and create a big headache for many people. We have probably all seen how inefficient government can be at times. I will stop at this point and not make it a political discussion :)