Trade allows buyers and sellers to exploit gains from specialization because it allows sellers to a. specialize in the production of the good or service for which they have an absolute advantage and buy goods and services for which they do not have an absolute advantage. b. specialize in the production of the good or service for which they have a comparative advantage and buy goods and services for which they do not have a comparative advantage. c. develop comparative advantages in the production of goods and services through the employment of low-wage workers, allowing them to sell their goods and services at a lower cost to buyers. d. develop an absolute advantage in the production of goods and services, which eventually forces buyers to pay higher prices for those goods and services.

Exercise 18-15 sheffield appliance center is an experienced home appliance dealer. sheffield appliance center also offers a number of services for the home appliances that it sells. assume that sheffield appliance center sells ovens on a standalone basis. sheffield appliance center also sells installation services and maintenance services for ovens. however, sheffield appliance center does not offer installation or maintenance services to customers who buy ovens from other vendors. pricing for ovens is as follows. oven only $790 oven with installation service 850 oven with maintenance services 970 oven with installation and maintenance services 990 in each instance in which maintenance services are provided, the maintenance service is separately priced within the arrangement at $180. additionally, the incremental amount charged by sheffield appliance center for installation approximates the amount charged by independent third parties. ovens are sold subject to a general right of return. if a customer purchases an oven with installation and/or maintenance services, in the event sheffield appliance center does not complete the service satisfactorily, the customer is only entitled to a refund of the portion of the fee that exceeds $790. assume that a customer purchases an oven with both installation and maintenance services for $990. (b) indicate the amount of revenue that should be allocated to the oven, the installation, and to the maintenance contract.