Final answer:
Total output in an economy increases when each person specializes due to resource optimization. This leads to greater efficiency through the development of specific skills and machinery. The production possibilities frontier illustrates this concept, and comparative advantage facilitates increases in total output via specialized production and trade.
Step-by-step explanation:
Total Output Increase and Specialization
Total output in an economy increases when each person specializes because of resource optimization. Specialization leads to individuals and firms focusing on a narrow range of products or services, which they can produce with greater productivity and efficiency. This efficiency arises because specialization allows for the in-depth development of skills and machinery that are specific to a particular task or product. The result is an increase in the total volume and quality of production.
According to the concept of comparative advantage, when countries or individuals specialize in producing goods or services for which they have a lower opportunity cost than others, and then trade with others, the overall output can increase. These efficiencies create a situation where it is possible to use society's resources more effectively, and all choices along a production possibilities frontier (PPF) display productive efficiency, demonstrating the most advantageous mix of goods and services production.
The law of increasing opportunity cost and the curvature of the PPF reflect the changes in marginal benefits and costs as resources are reallocated. Through specialization, the law of diminishing returns is offset as each entity produces what it can most efficiently, leading to an overall increase in total output when trade occurs. Therefore, economic output is increased through resource optimization, not through decreased efficiency, increased competition, or higher taxes, which supports the choice 'C' in the question presented.