Which of the following best describes the benefits of specialization in a free market?

• A. It allows individuals and firms to focus on tasks they perform most efficiently, increasing overall productivity.
• B. It reduces the variety of goods available to consumers.
• C. It eliminates the need for trade between individuals and countries.
• D. It leads to higher prices for all goods and services.

Answer: (A)

Verified step by step guidance

1. Understand the concept of specialization: In microeconomics, specialization refers to individuals or firms focusing on producing a limited range of goods or services in which they have a comparative advantage or higher efficiency.
2. Recognize the benefits of specialization: When individuals or firms specialize, they can produce more output with the same resources because they become more skilled and efficient at their specific tasks.
3. Consider the impact on productivity: Specialization increases overall productivity because resources are allocated to their most efficient uses, leading to higher total output in the economy.
4. Evaluate the options given: The correct description should highlight increased efficiency and productivity due to focusing on tasks performed best, rather than negative effects like reduced variety, elimination of trade, or higher prices.
5. Conclude that specialization in a free market allows individuals and firms to focus on tasks they perform most efficiently, which increases overall productivity.