Why would a nation choose not to produce everything its citizens want?

• A. Because international trade laws prohibit nations from producing all goods.
• B. Because producing everything would eliminate the need for specialization.
• C. Because citizens always prefer imported goods over domestic production.
• D. Because resources are limited and producing everything is not possible due to scarcity.

Answer: (D)

Verified step by step guidance

1. Understand the concept of scarcity: Resources such as labor, capital, and raw materials are limited, which means a nation cannot produce unlimited quantities of all goods and services.
2. Recognize the role of opportunity cost: Producing more of one good requires sacrificing the production of another good, so nations must make choices about what to produce based on their resource constraints.
3. Learn about specialization and comparative advantage: Nations benefit by specializing in producing goods for which they have a lower opportunity cost and then trading with others to obtain different goods.
4. Realize that producing everything domestically is inefficient: Attempting to produce all goods internally ignores the benefits of trade and specialization, leading to lower overall economic welfare.
5. Conclude that the fundamental reason a nation does not produce everything is scarcity, which forces choices and trade-offs in production decisions.