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JAMB Economics 1986 Question 5

Question 5

Theory of Production

The degree of specialization is limited by the

  1. A.availability of specialized skills and machinery
  2. B.marginal cost exceeding marginal revenue
  3. C.extent of the market
  4. D.disadvantage of standardization
Show the answer and explanation

Answer: C (extent of the market)

Explanation

Division of labour only pays if there is enough demand for the large output it creates, so it is limited by the size (extent) of the market.