Although each state could seek to produce all three

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Unformatted text preview: ate could seek to produce all three commodities independently, we can rest assured Nebraska and Idaho will have a near impossible time producing citrus fruit and the cost of doing so would be exorbitant. • Specialization allows us to use resources best suited for each use in production and we encounter considerable gains in output as a result. Nebraska can specialize in producing wheat, Idaho can specialize in producing potatoes, and Florida can specialize in producing oranges and each can trade with the other. • The net effect of all this specialization and trade is not only more productivity and total output, but also a higher standard of living for all involved. Specialization keeps costs lower and allows our budget to have more buying power in the market. An additional critical component enabling efficiency in market systems is the presence and use of money to facilitate trade. A primary function of money is that it serves as a medium of exchange. The use of money as a medium of exchange contributes to efficiency in a very important way because it allows an economy to evolve beyond the need to barter, or trade one good for another. The process...
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This note was uploaded on 09/10/2009 for the course ECO 2251 taught by Professor Kirkland during the Spring '09 term at Troy.

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