Question 1

The central idea of mercantilism is there should be an export surplus so a nation can accumulate precious metals.

Accepted Answer

The central idea of mercantilism is indeed the belief that a nation should export more than it imports in order to accumulate precious metals like gold and silver, which were seen as indicators of a country's wealth and power.

Question 2

Both developed nations and developing nations tend to trade more with developed nations.

Accepted Answer

This is known as the phenomenon of "North-South trade," where developed nations typically trade more with other developed nations, and developing nations also trade more with developed nations as they often lack the infrastructure and resources to trade extensively with other developing nations.

Question 3

China,Mexico,and Japan are the three largest trading partners of the U.S.,in terms of the total volume of imports and exports.

Accepted Answer

False

Question 4

The development of expanded regional trade agreements,such as the Association of Southeast Asian Nations,Mercosur,and the EU,can substantially alter the level and proportion of trade flows within and across regions.

Accepted Answer

Expanded regional trade agreements can indeed have a significant impact on the volume and balance of trade among countries in a specific region or across different regions. Such agreements may entail tariff reductions or eliminations, investment facilitation, and other measures that can stimulate cross-border trade and investment. As a result, trading patterns may shift, new supply chains may emerge, and some industries or countries might benefit more than others.

Question 5

The theory of absolute advantage suggests that under free,unregulated trade,each nation should specialize in producing those goods it can produce most efficiently,based on naturally occurring endowments such as minerals.

Accepted Answer

Specialization should be based on market forces, and its absolute advantage could be either natural or acquired.

Question 6

International trade includes exports,imports,and foreign direct investment.

Accepted Answer

The answer of International trade includes exports,imports,and foreign direct investment....

Question 7

There are a number of advantages in focusing attention on a nation that is already a sizable purchaser of goods coming from the would-be exporter's country.

Accepted Answer

Focusing on a nation that is already a sizable purchaser of goods can lead to increased exports and access to a reliable market.

Question 8

The magnitude of international trade and how it has grown are reflected in that one-fourth of everything grown or made in the world is now exported.

Accepted Answer

This statement is true. Approximately one-fourth of everything produced in the world is exported, showing the significant magnitude of international trade.

Question 9

Adam Smith explained how countries can benefit from international trade,even if they lack any absolute advantage over their trade partners.

Accepted Answer

The answer of Adam Smith explained how countries can benefit...

Question 10

In 2009,the top 10 exporting and importing nations collectively accounted for over half of all exports and imports of merchandise and services worldwide.

Accepted Answer

This statement is true.

Question 11

If a Chinese worker earns $1.00 a day,then goods produced by this worker will cost less than the same goods produced by an American earning $18.00 an hour.

Accepted Answer

Wage costs are neither all of the production costs nor all of the labor costs, and labor can also exhibit differences in productivity.

Question 12

International firms must export their products or services in order to establish and expand their overseas operations.

Accepted Answer

International firms can also establish and expand their overseas operations through other means such as foreign direct investment, franchising, licensing, and forming strategic alliances or joint ventures, not just through exporting.

Question 13

Arguments in support of mercantilism largely disappeared after the end of the mercantilist era in the late 1700s.

Accepted Answer

While mercantilism as a formal economic philosophy may have faded by the late 1700s, many of its principles and ideas continued to influence economic policies and practices in subsequent centuries. It was not until the rise of free trade and globalization in the 20th century that mercantilist ideas were widely discredited and replaced by new theories of economics.

Question 14

The first formulation of international trade theory,by Adam Smith,was motivated by political considerations.

Accepted Answer

Adam Smith's Wealth of Nations, published in 1776, was largely motivated by his interest in politics and philosophy. He believed that a country's wealth was based on the productivity of its citizens and the efficient use of resources, which could be achieved through free trade and competition. His theory of comparative advantage argued that countries should specialize in producing goods that they were relatively better at producing, and trade with other countries for goods that they were relatively worse at producing. This political and economic philosophy became the foundation of modern international trade theory.

Question 15

Importing and foreign direct investment are two approaches to meeting overseas demand.

Accepted Answer

The answer of Importing and foreign direct investment are two...

Question 16

Approximately 70 percent of the exports from developed countries go to developed countries.

Accepted Answer

This statement is true according to the World Trade Organization's data. In 2019, developed countries accounted for 70 percent of the world's total merchandise exports, with the top 10 exporters being developed countries. Additionally, developed countries also import a significant proportion of their goods from other developed countries.

Question 17

The proportion of manufacturing value added that is located in developed countries has been roughly stable since 1995.

Accepted Answer

According to the World Bank, the proportion of manufacturing value added located in developed countries has been declining since 1995.

Question 18

The dollar value of total world exports in 2007 was greater than the gross national product of every nation in the world except Japan.

Accepted Answer

In 2007, the dollar value of total world exports was greater than the gross national product of every nation in the world except the United States, not Japan.

Question 19

South and East Asia's share of the world's manufacturing value added has nearly tripled since 1980.

Accepted Answer

The answer of South and East Asia's share of the...

Question 20

According to the theory of comparative advantage,a nation can gain from trade if it is not equally less efficient in producing two goods.

Accepted Answer

The theory of comparative advantage suggests that a nation should specialize in producing and exporting goods in which it has a comparative advantage, meaning it produces that good at a lower opportunity cost than its trading partner. This allows both countries to specialize in producing the goods they are better at, leading to a net increase in economic welfare. Therefore, a nation can gain from trade even if it is not equally efficient in producing two goods.

Quiz 2: International Trade and Investment