Question : 51.An inconsistency in the mercantilist doctrine, as pointed out by : 1299288

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

A. the volume of a country’s imports increase as an indirect consequence of mercantilism.

B. the exclusion of government influence in matters pertaining to trade is not ideal.

C. in the long run, no country could sustain a surplus on the balance of trade.

D. it was not backed by either sound political principles or social ideologies.

E. trade is a zero-sum game rather than a positive-sum game as postulated by the theory.

52.The flaw with mercantilism was that it viewed trade as a: 

A. zero-sum game.

B. mutually beneficial activity.

C. positive-sum game.

D. threat to a nation’s sovereignty.

E. threat to a nation’s economy.

53.What is a zero-sum game? 

A. A situation in which the market mechanism determines what a country imports and what it exports.

B. A situation in which a country engages in international trade even for products it is able to produce for itself.

C. A situation in which a gain by one country results in a loss by another.

D. A situation in which limits on imports are often in the interests of domestic producers, but not domestic consumers.

E. A situation in which one country has an absolute advantage in the production of all goods.

54.Neo-mercantilists equate political power with economic power and economic power with _____. 

A. corruption

B. a balance-of-trade surplus

C. regional dominance

D. a trade monopoly

E. capitalism

55.According to Adam Smith and David Ricardo, trade is _____. 

A. a zero-sum game

B. a threat to a nation’s sovereignty

C. a threat to a nation’s economy

D. a positive-sum game

E. harmful for all developed nations

56.In his 1776 landmark book The Wealth of Nations, Adam Smith attacked _____ by criticizing its assumption that trade is a zero-sum game. 

A. mercantalism

B. capitalism

C. the new trade theory

D. the product life-cycle theory

E. the theory of factor endowments

57.A country is said to have a(n) _____ in the production of a product when it is more efficient than any other country in producing that product. 

A. comparative advantage

B. relative advantage

C. differential advantage

D. absolute advantage

E. conditional advantage

58.According to Adam Smith, countries should specialize in the production of goods for which they have an absolute advantage and then: 

A. retain these goods for strict domestic sales.

B. trade these goods for goods produced by other countries.

C. sell these products domestically at prices which are much below the cost price.

D. sell these products at a price, which is lower than the cost price, in developing countries so as to help them achieve economic progress.

E. devote all available resources to produce only those goods.

59.Cadmia and Rhodia specialize in the production of textiles and agricultural products respectively. They are the best at their respective specializations. Cadmiatrades textiles with Rhodia in exchange for agricultural products. Which of the following is illustrated by this form of trade between Cadmia and Rhodia? 

A. Product life-cycle theory

B. Heckscher-Ohlin theory

C. The concept of absolute advantage

D. Mercantilism

E. Theory of national competitive advantage

60.Which of the following is a correct inference from Adam Smith’s theory of absolute advantage? 

A. There is no virtue in a large volume of trade. Rather, policies should be implemented to maximize exports and minimize imports.

B. It is in a country’s best interests to maintain a trade surplus, to export more than it imports.

C. Trade is a zero-sum game in which a gain by one country results in a loss by another.

D. A country that has an absolute advantage in the production of all goods might derive no benefits from international trade.

E. Trade is a positive-sum game in which all countries that participate realize economic gains.