International specialisation

Two countries want to use their scarce resources to specialise in production and trade with each other. In what conditions is this most likely to occur?

Feb/March 2024

A country possesses substantial oil reserves. It chooses to make a broad variety of products instead of concentrating on oil production. What is not an acceptable reason for supporting this decision?

Feb/March 2025

What is one benefit of international specialisation?

May/June 2015

What is one benefit of international specialisation?

May/June 2015

What is one benefit of international specialisation?

May/June 2015

There are fears that chocolate prices could rise sharply over the next few years. This is due to stronger demand for chocolate, especially in emerging countries, alongside supply difficulties in the countries that grow cocoa beans. Cocoa beans, the key ingredient in chocolate, are produced mainly on the west coast of Africa by small farms using labour-intensive methods. In 2012 Côte d’Ivoire (Ivory Coast) accounted for 37% of the world’s output of cocoa beans, with Indonesia next at 13%. Côte d’Ivoire is increasingly recognised for supplying high-quality cocoa beans. Concentrating on the product that best suits its resources has increased output in the country. Gross Domestic Product per head rose to US$1240 in 2013. However, some farmers and farm workers still live on less than US$2 a day. In Indonesia, the earnings of most cocoa farmers and farm workers rose as the country’s average income increased between 2013 and 2014. Their purchasing power was nevertheless reduced by the consumer prices index rising from 108.0 in 2013 to 115.2 in 2014. Although medical care in Indonesia is improving, with more doctors per head, the government is trying to raise education standards. The problems being faced by cocoa bean producers include an ageing labour force, with the industry struggling to attract young farmers and farm workers. The industry also regularly experiences difficulties caused by pests and diseases, including black pod disease. At the same time, people in Asia, particularly China, are eating more chocolate and drinking more chocolate drinks. People in the United States of America and the European Union are also eating more chocolate, although worries about the health effects of eating large quantities of chocolate are beginning to affect demand. For many people, however, chocolate is addictive. Chocolate producers try to exploit this by widening the gap between revenue and costs. Most chocolate producers are based in developed countries and most are public limited companies trying to keep their shareholders happy. These producers use their market power to keep the price they pay for cocoa beans relatively low while the price they charge consumers who buy their chocolate is kept relatively high.

May/June 2016

What factors could promote international specialisation among countries?

May/June 2017

Botswana is the largest diamond producer in the world. In fact, in 2015 diamonds made up one third of the country’s Gross Domestic Product (GDP) of US$18 billion and 80% of its exports. At present, most of the nation’s earnings come from mining and selling rough (uncut) diamonds. For a 1.5 carat rough diamond, it receives only US$700. After that, the diamond is cut, polished and finished, usually in other countries. India leads the world market for cutting and polishing diamonds. The cost of cutting and polishing diamonds in India is only a quarter of the cost in Botswana. The worldwide average cost of finishing a 1.5 carat diamond is US$8000. The diamond is then sold to the customer with a 25% profit margin. Botswana is attempting to build up industries linked to diamond mining, including cutting, polishing and jewellery making such as diamond rings. Fig. 1 illustrates the way the global market for diamond rings changed in 2015. Fig. 1 The global market for diamond rings in 2015. The vertical axis is labelled "price of diamond rings" and the horizontal axis is labelled "quantity of diamond rings". The origin is labelled O. Two equilibrium prices are labelled $P_1$ and $P_2$. Two equilibrium quantities are labelled $Q_1$ and $Q_2$. There is an upward sloping supply curve labelled S. There are two downward sloping demand curves labelled $D_1$ and $D_2$. The Botswanan Government has also persuaded the world’s largest diamond company to establish itself in Gaborone, the capital of Botswana. However, some government ministers worry that Botswana relies too heavily on diamonds. They point out that the supply of diamonds is finite and call on the government to promote diversification. In addition to diamonds, the country has several other strengths. It benefits from good infrastructure, a developed education system and free hospital treatment.

May/June 2017

The table presents the rice yield for four countries. What conclusion can be drawn from this information?

May/June 2018

What is the most likely drawback of international specialisation?

May/June 2019

What is one drawback of greater international specialisation?

May/June 2021

At what point are countries most likely to specialise and trade with one another?

May/June 2022

What benefit does specialisation at a national level bring to a firm?

May/June 2024

Which factor is most likely to encourage international specialisation?

May/June 2024

What would raise the degree of specialisation in an economy?

May/June 2025

Country Y chooses to specialise in the domestic extraction of rare metals needed to make electric-car batteries. What is one likely advantage of this for country Y?

May/June 2025

Which factor is most likely to promote international specialisation?

Oct/Nov 2015

Which factor is most likely to promote international specialisation?

Oct/Nov 2015

What is most likely to promote international specialisation?

Oct/Nov 2015

What motivates international specialisation?

Oct/Nov 2016

What factors encourage international specialisation?

Oct/Nov 2016

Which policy would promote greater international specialisation?

Oct/Nov 2017

Which option is the clearest example of specialisation?

Oct/Nov 2017

The Gulf states, several of which are highly specialised, bring in a large share of the food their people eat. For instance, the United Arab Emirates imports 83% of all the food it consumes. These countries are seeking to cut their dependence on food imports.

Oct/Nov 2017

What is most likely to reduce international specialisation and trade in an economy?

Oct/Nov 2020

Free trade has enabled the Mexican economy to specialise in low-cost manufacturing. Unemployment nationwide is fairly low, but about 50 million people were still judged to be in poverty in 2016. In addition, there are concerns that technological advances will soon substitute capital for labour.

Oct/Nov 2020

Why might specialisation result in economic growth?

Oct/Nov 2021

A country concentrates on producing steel, toys and textiles. What disadvantage might specialisation bring for the country’s workers?

Oct/Nov 2021

Malaysia and Indonesia focus on producing palm oil. What is one drawback of specialisation?

Oct/Nov 2021

What is the most likely outcome of increasing specialisation in manufacturing?

Oct/Nov 2023

Which factor is most likely to encourage international specialisation?

Oct/Nov 2023

Malaysia used to focus mainly on producing and exporting natural rubber. Making natural rubber was highly labour-intensive. Even though it is still among the world’s top 5 exporters of natural rubber, Malaysia has shifted towards manufacturing goods that use natural rubber rather than simply producing and exporting this primary product.

Oct/Nov 2023

Which statement identifies two advantages for consumers of specialisation at a national level?

Oct/Nov 2024

What factors might promote international specialisation among countries?

Oct/Nov 2024

Which factors promote international specialisation?

Oct/Nov 2024

Chile focuses on producing copper for export. Explain how a substantial increase in the supply of copper from other countries is likely to affect the Chilean economy.

Oct/Nov 2025

What benefit do consumers gain from international specialisation?

Oct/Nov 2025

What is one benefit of international specialisation?

Oct/Nov 2025

What is one probable advantage of greater national specialisation?

Oct/Nov 2025