Question

A) Why do Floridians buy their potatoes form Idahoans rather than produce potatoes themselves? B) Explain the connection between Markets, Specialization, and Trade.

Answer 1

A) Floridians buy their potatoes from Idahoans rather than produce potatoes themselves because the latter can produce potatoes at a lower opportunity cost than the former country. This is from the Ricardian theory of comparative advantage. Florida takes advantage of specialization and does not produce potatoes instead trades with Idahoans which can produce it at a lower opportunity cost.

B) Markets produce goods and services which are traded among economies and specialization provides incentives to these economies to trade goods rather producing all the goods in the domestic country while specializing in the production of only those goods which they can produce at a lower opportunity cost compared to other country.