Which of the following is a risk associated with complete specialization in the production of a single good?

• A. Increased ability to produce a wide variety of goods
• B. Elimination of opportunity cost
• C. Guaranteed stability in income and employment
• D. Vulnerability to changes in demand or price for that good

Answer: (D)

Verified step by step guidance

1. Understand the concept of complete specialization: it means focusing all resources on producing only one good, rather than diversifying production across multiple goods.
2. Recognize that specialization can increase efficiency and output for that particular good, but it also means the economy or producer depends heavily on the market conditions for that single good.
3. Identify the risks associated with this dependence, such as exposure to fluctuations in demand or price for the specialized good, which can lead to unstable income or employment.
4. Contrast this with the incorrect options: specialization does not increase the ability to produce a wide variety of goods (it reduces it), does not eliminate opportunity cost (there is always a trade-off), and does not guarantee stability in income or employment (it can actually increase risk).
5. Conclude that the main risk of complete specialization is vulnerability to changes in demand or price for the specialized good, making the economy or producer less resilient to market shocks.