Introduction to Economics
Being the manager of a financial planning business, a decision must be made concerning two of the financial planners. Phil and Francis both have the ability to produce financial statements and answering the telephone calls. Research reveals a solution to the issue of self-sufficiency or job specialization (O’Sullivan, Sheffrin, & Perez, 2010). The data is collected, processed, and analyzed for making the decision on Phil and Francis being self-sufficient or specializing to ensure greater productivity in financial planning.
Phil can prepare one financial statement or answer eight telephone calls in an hour. Francis can prepare four financial statements or answer ten telephone calls in an hour. Opportunity cost is the base of specialization and trade which benefits people. As shown below, Francis has the absolute advantage in completing both tasks (O’Sullivan, Sheffrin, & Perez, 2010). The opportunity cost for Phil is eight telephone calls for 1/8 financial statements. The opportunity cost for Francis is giving up two and one-half telephone calls for 2/5 financial statements. | Phil | Francis | | Fin. Stmt. | Ph. calls | Fin. Stmt. | Ph. Calls | Output per hour | 1 | 8 | 4 | 10 | Opportunity Cost | 8 phone calls | 1/8 financial statement | 2 1/2 phone calls | 2/5 financial statements | If Phil and Francis were to specialize they would be more productive, a gain for the financial planning business. When analyzing why the specialization would be beneficial the following is considered. There are eight hours in each work day. As seen below, when Phil is self-sufficient he decides to devote four hours to the production of finicial statements and four hours to answering telephone calls. Therefore, four financial statements are produced and thirty-two telephone calls are answered by the end of the day. Francis decides to devote five hours to financial statement preparation and three hours to answering telephone calls. Therefore, twenty financial statements are produced and thirty telephone calls are answered by the end of the day. (O’Sullivan, Sheffrin, & Perez, 2010). Being self-sufficient, Phil and Francis together produce twenty-four financial statements and answers sixty-two telephone calls.
If Phil were to specialize in answering telephone calls and Francis in preparing financial statements we would see a total of thirty-two financial statements prepared by Francis and sixty-four telephone calls answered by Phil. Specialization shows greater gains than self-sufficiency and the business is better off having Phil answering telephone calls and Francis preparing financial statements. Phil can make eight more telephone calls and Francis can prepare two more financial statements when they specialize. This voluntary exchange between Phil and Francis makes it better for both of them as Phil can answer more telephone calls while Francis prepares more financial statements. | Phil | Francis | Total | | Fin. Stmt. | Ph. calls | Fin. Stmt. | Ph. calls | Fin. Stmt. | Ph. calls | Self-sufficient | 4 | 32 | 20 | 30 | 24 | 62 | Specialization | 0 | 64 | 32 | 0 | 32 | 64 |

In conclusion, specialization and exchange enables both Phil and Francis better off as each can assist each other in their financial planning jobs. Francis has the absolute advantage, but specialization is greater than self-sufficiency. Gains can be made by specialization.

References
O’Sullivan, A., Sheffrin, S. M., and Perez, S. J. (2010). Economics principles, applications, and tools. (6th ed.). Upper Saddle River, NJ: Prentice Hall.