What does specialization mean in economics?

Specialization in economics refers to the concentration of productive efforts on a limited number of activities or tasks. When individuals, firms, or countries focus on producing specific goods or services in which they have a comparative advantage, they can enhance productivity and efficiency. This can lead to increased output and economic growth, as resources are allocated toward activities that yield the highest returns.

By specializing, entities can become more skilled and efficient in their designated areas, leading to a higher quality of products and services while often lowering the costs of production. The concept of specialization is fundamental to trade and is essential in understanding how economies grow and operate.

The other options suggest concepts that do not accurately capture the essence of specialization. For instance, reducing the workforce in a sector does not inherently reflect specialization, nor does broadening production capabilities across multiple sectors. In fact, increased competition among firms is not a direct result of specialization but can arise from various market dynamics, including specialization itself when firms begin to focus on niche markets.