Final answer:
Increasing opportunity costs often lead to less-than-complete specialization, which can reduce the efficiency of international trade and potentially affect a nation's balance of trade by leading to trade imbalances.
Step-by-step explanation:
The main effect of increasing opportunity costs in the context of international trade and specialization is less-than-complete specialization. As opportunity costs rise, it suggests that the relative efficiency of producing certain goods is decreasing. Countries faced with high opportunity costs may find it less beneficial to specialize exclusively in the production of certain goods or services that are more costly to produce. Thus, they may diversify their production rather than specializing, which may lead to a decrease in international trade efficiency.
International trade is built on the principle of comparative advantage, where countries benefit by specializing in goods they can produce at a lower opportunity cost and trading for goods that are costly for them to produce. However, if these costs rise, specialization could become inefficient, leading countries to produce a wider range of goods themselves. This change in production patterns can lead to a reduction in trade volumes and efficiency, ultimately affecting a nation's balance of trade and potentially leading to trade imbalances.
Overall, while specialization and trading can lead to a higher standard of living for countries due to lower opportunity costs and increased production, the rise in opportunity costs complicates this dynamic, potentially reducing the benefits of trade and altering labor and capital allocations across industries.