Question

in the island of never land, wendy only bakes bread; john only picks berries, and peter pan only milks the cow. at the end of the day they satisfy their needs by trading among themselves.
the economic system in never land is based on:
○ a system in which every one is a jack of all trades.
○ absolute advantage.
○ specialization.
○ exchange.
○ specialization and exchange.

Explanation:

1. Analyze each option:

• "a system in which everyone is a jack of all trades": This is incorrect because Wendy, John, and Peter Pan each do only one task, not multiple.
• "absolute advantage": Absolute advantage refers to the ability to produce more of a good/service with the same resources. The scenario focuses on each person doing one task (specialization) and then trading (exchange), not on production efficiency comparison for absolute advantage.
• "specialization": While they do specialize (each has one task), they also trade, so this is only part of the system.
• "exchange": They do exchange, but the foundation starts with each specializing in a task before exchanging.
• "specialization and exchange": Wendy, John, and Peter Pan each specialize in one activity (baking, picking berries, milking), and then they trade among themselves to satisfy their needs. This option includes both the specialization of tasks and the exchange of goods/services.

Answer:

E. specialization and exchange.