Final answer:
As specialization increases in an economy, production generally increases due to more efficient division of labor and the benefits of economies of scale, resulting in greater overall output and lower average costs per unit.
Step-by-step explanation:
The increase in specialization generally leads to an increase in production within an economy. As outlined by the famous economist Adam Smith, the division and specialization of labor allow for greater efficiency in production. For example, in a pin factory, a division of labor among ten workers, where each is assigned specific tasks, results in a collective output of 48,000 pins in a day. This is significantly higher compared to if each worker attempted to produce pins independently. Specialized workers can focus on refining their individual tasks, thereby increasing total production.
Moreover, specialization contributes to more efficient use of labor and machinery, leading to economies of scale. This refers to the phenomenon where, as production scales up, the average cost per unit decreases. A car factory producing 50,000 cars annually will have a lower average cost per car than a factory producing only 100 cars, due to the former's ability to use specialized labor and machinery more effectively. The end result is that society can produce and consume more than if people attempted to be self-sufficient in all areas.