Overdependence in Global Trade

Steps:

• Define international specialisation: countries focus on producing goods they have comparative advantage in, trading with others for the rest.
• Identify advantages: boosts efficiency, output, and productivity through specialisation.
• List potential disadvantages: risks include trade disruptions, reliance on foreign partners, and vulnerability to global events.
• Evaluate choices: match disadvantages to options, selecting the most likely economic risk.

Why D is correct:

• International specialisation increases trade interdependence, making economies vulnerable to supply chain failures or partner instability, per the theory of comparative advantage by David Ricardo.

Why the others are wrong:

• A: Specialisation raises global output via efficient resource allocation.
• B: It lowers average costs through economies of scale and specialisation.
• C: Specialisation enhances productivity by focusing on strengths.

Final answer: D