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To properly address the question, we first need to understand the term "division of labor". Division of labor is the process of dividing a large task into smaller, specialized tasks, which are then assigned to different workers or groups of workers. This process helps to increase efficiency and productivity in an economy.

The first reason that the division of labor increases an economy's level of production is through specialization. When workers are assigned specialized tasks, they can focus on developing their skills in a specific area. This allows them to become more skilled and proficient in performing their tasks, which increases their overall productivity. As each worker becomes more efficient in their specialized role, the economy's total output increases.

The second reason that the division of labor increases an economy's level of production is by saving time. When workers perform only one specific task, they do not need to constantly switch between tasks, which can be time-consuming. Reducing the time spent on switching tasks allows workers to accomplish more work overall, thus increasing productivity and total output in the economy.

The third reason that the division of labor increases an economy's level of production is by bringing about economies of scale. When tasks are divided, and workers are specialized, businesses can produce goods more efficiently. This efficiency can lead to a reduction in production costs, as businesses take advantage of higher levels of output and lower unit costs. The increased efficiency and cost savings can then lead to higher production levels in the economy. In conclusion, the division of labor increases an economy's level of production through specialization, time savings, and economies of scale. These three reasons ultimately lead to more efficient and productive workforces, and therefore, higher levels of output in the economy.