Specialization in production is important primarily because it:

• A. allows resources to be used more efficiently, increasing total output
• B. eliminates the need for trade between individuals or countries
• C. reduces the variety of goods and services available in the market
• D. ensures that all individuals receive equal income

Answer: (A)

Verified step by step guidance

1. Understand the concept of specialization in production: it refers to focusing resources and labor on producing a limited range of goods or services to increase efficiency.
2. Recall the principle of comparative advantage, which explains that individuals or countries benefit by specializing in producing goods where they have a lower opportunity cost.
3. Recognize that specialization allows resources to be allocated more efficiently, leading to an increase in total output because workers and resources become more skilled and productive in specific tasks.
4. Evaluate the incorrect options: specialization does not eliminate the need for trade; rather, it encourages trade to obtain other goods. It also does not reduce variety but can increase it through trade, and it does not guarantee equal income distribution.
5. Conclude that the primary importance of specialization is that it allows resources to be used more efficiently, thereby increasing total output.