Which of the following best explains why producers choose to specialize?

• A. Specialization enables producers to focus on goods or services where they have a comparative advantage.
• B. Specialization reduces the need for factors of production.
• C. Specialization allows producers to increase efficiency and lower costs.
• D. Specialization guarantees higher profits for all producers.

Answer: (C)

Verified step by step guidance

1. Understand the concept of specialization: Producers focus on producing a limited range of goods or services to improve efficiency.
2. Recall the principle of comparative advantage: Producers specialize in goods or services where they have a lower opportunity cost compared to others.
3. Recognize that specialization leads to increased efficiency because producers become more skilled and can use resources more effectively.
4. Note that increased efficiency typically results in lower production costs, which can improve competitiveness in the market.
5. Understand that while specialization can lead to higher profits, it does not guarantee them for all producers, as market conditions and other factors also play a role.