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Chapter 1: Problem 10

Give the three reasons that explain why the division of labor increases an economy's level of production.

Short Answer

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The division of labor increases an economy's level of production for three main reasons: 1) Increase in efficiency - as workers specialize in specific tasks, they become more proficient and skilled, leading to higher efficiency and output. 2) Time saving - specialization reduces the time spent on switching between tasks or learning multiple skills, allowing workers to focus on perfecting their assigned task and reduce overall production time. 3) Utilization of comparative advantage - by identifying their comparative advantage in producing specific goods and services, individuals and groups can specialize accordingly, leading to increased overall productivity and output in the economy.

Step by step solution

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1. Increase in Efficiency

The division of labor allows workers to specialize in specific tasks. By focusing on one task rather than multiple tasks, workers can become more proficient and skilled at their assigned task. This increased skill level leads to an increase in efficiency, as workers can complete their tasks more quickly and with a higher success rate.
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2. Time Saving

As a result of specializing in specific tasks and becoming more efficient, workers are able to save time during the production process. For example, if a worker only has to focus on one aspect of production, they do not need to spend time switching between tasks or learning multiple skills. This allows workers to dedicate more time to perfecting their own task, leading to an overall decrease in production time and an increase in output.
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3. Utilization of Comparative Advantage

The division of labor allows for the effective use of comparative advantage in an economy. Comparative advantage is the concept that individuals or groups should produce goods and services in which they have a lower opportunity cost, allowing them to produce these goods and services more efficiently. Through the division of labor, individuals and groups can identify their comparative advantage and specialize in producing that specific product or service. This specialization allows for an increase in the overall productivity and output of the economy.

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