Which Theory Attempted to Explain Why a Favorable Balance of Trade

question 93

Multiple Choice

Which theory attempted to explain why a favorable balance of trade could only exist in the short run, since it would automatically be eliminated in the long run?

• A) price-specie flow doctrine
• B) theory of absolute advantage
• C) theory of comparative advantage
• D) theory of fluctuating incomes

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Definitions:

Natural Monopoly

A market in which a single firm can provide a good or service at a lower cost than any potential competitor, due to economies of scale.

Lower Cost

A situation where the expenses involved in producing a good or service are reduced, leading to potential savings.

Social Regulation

Rules imposed by government aimed at improving societal welfare, focusing on areas such as health, safety, and the environment, rather than on economic matters.

Natural Monopoly

A market structure where a single firm can produce at a lower cost than can two or more firms, justifying limited competition.