Question 1

One of the central beliefs of mercantilism is that

Accepted Answer

Mercantilism advocates for government intervention to achieve a trade surplus, emphasizing exports over imports to accumulate wealth.

Question 2

The Salcian government decides on the products that can be imported and ensures that any product that can be produced at home is not imported. Instead, the government wants to maximize exports to achieve a surplus in the balance of trade. Which perspective likely influences Salcia's approach to international trade?

Accepted Answer

Mercantilism is an economic theory that emphasizes maximizing exports and minimizing imports to achieve a trade surplus, aligning with Salcia's approach.

Question 3

Porter's theory suggests that it is in the best interest of business for a firm to invest in upgrading advanced factors of production.

Accepted Answer

Porter's theory, specifically the Diamond Model, emphasizes the importance of investing in advanced factors of production, such as technology and skilled labor, to maintain competitive advantage.

Question 4

An inconsistency in the mercantilist doctrine, as pointed out by David Hume, is that

Accepted Answer

David Hume argued that in the long run, a country could not sustain a trade surplus because it would lead to an increase in money supply, causing inflation and making exports less competitive.

Question 5

Garrett works in a country where the government does not set quotas or duties on what its citizens can buy from another country, or what they can produce and sell to another country. In other words, Garrett's country practices

Accepted Answer

Garrett's country practices free trade, which means there are no government-imposed restrictions like quotas or duties on international trade.

Question 6

According to Michael Porter, government can influence each of the four components of Porter's diamond-either positively or negatively.

Accepted Answer

Porter's Diamond Model suggests that government can impact the four components: factor conditions, demand conditions, related and supporting industries, and firm strategy, structure, and rivalry, through policies and regulations.

Question 7

A zero-sum game occurs when

Accepted Answer

In a zero-sum game, one party's gain is exactly balanced by another party's loss, which aligns with the concept of economic gain by one country resulting in an economic loss by another.

Question 8

As a trade theory, mercantilism was based on the idea that a trade surplus would lead to

Accepted Answer

Mercantilism emphasized accumulating wealth, particularly gold and silver, through a trade surplus, believing it would increase national power and wealth.

Question 9

Sentoria is an island nation in the Pacific Ocean. Its geographical location is advantageous since it has access to a variety of aquatic life forms and also a number of freshwater sources that provide for fisheries. The lack of arable land drives local demand for seafood, and Sentoria is one of the world's major exporters of this product. Which theory of international trade best explains Sentoria's dominance as an exporter of seafood?

Accepted Answer

The answer of Sentoria is an island nation in the...

Question 10

From the perspective of making a profit, it is sensible for a company to disperse production activities to countries where they can be performed most efficiently.

Accepted Answer

Dispersing production activities to countries where they can be performed most efficiently can reduce costs, increase productivity, and enhance competitiveness, leading to higher profits.

Question 11

Which theory asserts that countries should simultaneously encourage exports and discourage imports?

Accepted Answer

Mercantilism is the theory that suggests countries should encourage exports and discourage imports to accumulate wealth and maintain a favorable balance of trade.

Question 12

The theory of ________ was the first to explain why unrestricted free trade benefits a country.

Accepted Answer

The theory of absolute advantage, proposed by Adam Smith, was the first to explain how countries can benefit from unrestricted free trade by specializing in the production of goods where they have an absolute advantage.

Question 13

The nation of Tazia exports agricultural products and in turn imports products that it does not produce such as computers and electronic devices. As a result, it spends more on imports than it gains from exports. Which perspective would frown on this form of international trade?

Accepted Answer

Mercantilism is an economic theory that emphasizes the importance of maintaining a trade surplus, meaning a country should export more than it imports. It would frown upon Tazia's situation of spending more on imports than it gains from exports.

Question 14

What was the principle currency of trade in the mid-sixteenth century when mercantilism came into favor in England?

Accepted Answer

During the mid-sixteenth century, gold and silver were the principal currencies of trade, especially under the mercantilist economic system, which emphasized the accumulation of precious metals.

Question 15

Michael Porter argues that advanced factors are the most significant for competitive advantage.

Accepted Answer

Michael Porter, in his theory of national competitive advantage, emphasizes that advanced factors such as skilled labor, infrastructure, and technological innovation are crucial for sustaining competitive advantage.

Question 16

Many years ago, the Republic of Janua believed that it was in its best interests to maintain a trade surplus, to export more than it imports. In so doing, the Republic of Janua hoped to accumulate gold and silver, and consequently, increase its national wealth, prestige, and power. What influenced the Republic of Marunia's approach to international trade?

Accepted Answer

The Republic of Janua's approach to international trade was influenced by mercantilism, which emphasizes maintaining a trade surplus to accumulate wealth and increase national power.

Question 17

Which strategy is in a country's best interests, according to the main tenet of mercantilism?

Accepted Answer

Mercantilism advocates for a country to maintain a trade surplus, meaning it should export more than it imports, to accumulate wealth and strengthen national power.

Question 18

Porter's theory has been subjected to detailed empirical testing and it is proven that it accurately predicts international trade patterns.

Accepted Answer

Porter's theory, while influential, has not been universally proven to accurately predict international trade patterns, as it is more of a framework for understanding competitive advantage rather than a predictive model.

Question 19

When the country of Matu trades with the country of Balor, Matu experiences a gain because of the high costs of its products while Balor experiences a loss because it is trading small amounts of products that cost very little. Which characteristic of the mercantilist theory does this reflect?

Accepted Answer

The mercantilist theory views trade as a zero-sum game, where one country's gain is another country's loss. This scenario reflects that perspective, as Matu gains at Balor's expense.

Question 20

According to the Smith, Ricardo, and Heckscher-Ohlin theories, a country's economy may gain if its citizens buy some products from other nations that could be produced in their home nation. What is the reasoning behind this idea?

Accepted Answer

International trade allows countries to specialize in the production of goods where they have a comparative advantage, leading to more efficient production and potential gains from trade.

Quiz 6: International Trade Theory