Week 4: Part 2; (lecture) Theories of International Trade

Question 1

What is Mercantilism?

Answer 1

A theory and practice (1500-1800) that posits a fixed amount of wealth in the world, emphasizing that countries should export more than they import to amass treasure (favorable balance of trade).

Question 2

1. What is the primary focus of David Ricardo’s theory of comparative advantage?
   A) The fixed amount of wealth in the world
   B) The ability of a country to produce more of a good than another country
   C) The relative efficiency of producing goods in different countries
   D) The importance of government intervention in trade

Answer 2

c

Question 3

2. Which theory emphasizes the role of factor endowments in determining trade patterns?
   A) Mercantilism
   B) New Trade Theory
   C) Factor Proportions Theory
   D) Strategic Trade Theory

Answer 3

c

Question 4

. What does New Trade Theory suggest about trade between similar countries?
A) It is inefficient and should be avoided
B) It occurs primarily due to differences in labor costs
C) It can arise from growing returns to scale and increased efficiency
D) It is only beneficial when one country has a clear competitive advantage

Answer 4

c