Question:
Which best describes the challenge faced by developing countries that depend on the international sale of one natural resource?
A) Lack of diversification
B) Stagnant prices
C) Declining stocks
D) Increased competition
E) Lack of manufacturing
Answer:
The correct answer is A) Lack of Diversification
Explanation:
Economies that suffer from the above-described problem are referred to in economic parlance as Mono-product economies.
In real-world scenarios, many countries which are described with the above term actually have the capacity to produce and export other products. But for some reasons such as politics, poor governance, poor leadership, lucrativeness or productivity of the primary product, etc they are content to explore and export one product which constitutes between 75-100% of their gross national revenue.
Examples of such countries are:
- Nigeria (Primary Product - Crude Oil products)
- Zambia (Primary Product - Refined and Unrefined Copper)
- Venezuela (Primary Product - Crude Oil products) and
- Angola (Primary Product - Mineral Fuels...especially crude oil)
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Answer:
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