Question

3. How does specialization affect an economy?

It results in more innovation.
It makes the economy less efficient.
It prevents duplication of effort.
It discourages entrepreneurs.

Answer 1

It prevents duplication of effort. The reason is because say Sally can make 25 pizzas or 10 necklaces per hour, and John can make 30 pizzas and 20 necklaces per hour. It's more efficient to have John make necklaces and for Sally to make pizzas because John only makes 5 more pizzas as opposed to 10 more necklaces per hour.

So instead of everyone shifting work around, they can find what they excel at (see: comparative advantage).