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JAMB Economics 1998 Question 9

Question 9

Theory of Production

Specialization often improves economic performance because it

  1. A.permits exploitation of economies of scale
  2. B.incorporates external economies
  3. C.is based on the law of variable proportions
  4. D.allocates resources according to absolute advantage.
Show the answer and explanation

Answer: A (permits exploitation of economies of scale)

Explanation

When firms and workers specialise, output can be produced on a large scale with special machines and skills, which lowers cost per unit. These economies of scale are why specialization improves economic performance.