When a country chooses to limit the kinds of goods or services it produces, it is practicing:

• A. substitution
• B. autarky
• C. diversification
• D. specialization

Answer: (D)

Verified step by step guidance

1. Understand the key terms: 'substitution' refers to replacing one good with another; 'autarky' means economic self-sufficiency without trade; 'diversification' means producing a wide variety of goods; and 'specialization' means focusing on producing a limited range of goods or services.
2. Recognize that the problem describes a country limiting the kinds of goods or services it produces, which implies focusing on fewer goods rather than many.
3. Recall that specialization is the economic concept where a country concentrates its resources on producing certain goods or services in which it has an advantage or preference.
4. Compare the definitions and see that specialization best fits the description of limiting production to certain goods or services.
5. Conclude that the country is practicing specialization because it chooses to produce only specific goods or services rather than a broad range.