CMA Foundation · Fundamentals of Business Economics and Management · Means of Production
Adam Smith's pin factory example, used to illustrate division of labour, shows that the increase in productivity arises mainly because of:
Smith's pin factory shows productivity rises because each worker gains dexterity in a single task and no time is lost switching between tasks. Subsidies or cheaper raw materials are not the reason, and market size only limits how far division can go.
- ADexterity gained from specialisation and saving of time in moving between tasksCorrect
- BGovernment subsidy to pin makers
- CA fall in the price of raw material
- DIncrease in the size of the market only
Explanation
Smith attributed higher output to improved dexterity, time saved by not switching between tasks, and the invention of machines. Subsidy and raw material price are not part of his argument. Market size limits the extent of division but is not the source of the gain itself.
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