Final answer:
Adam Smith found that pins could be manufactured in two ways - by a single worker completing all tasks or by dividing the tasks among multiple workers, each specializing in a specific task. Division of labor increased production by allowing each worker to become more efficient and specialized, resulting in higher output.
Step-by-step explanation:
Adam Smith found that pins could be manufactured in two ways: by one worker completing all the tasks involved in making a pin, or by dividing the tasks among multiple workers, each specializing in a specific task. Smith observed that when tasks were divided, a group of workers could produce a much larger quantity of pins compared to a single worker. This division of labor increased production because it allowed each worker to become more efficient and specialized in their assigned task, leading to a higher overall output.