Which of the Following Is True About the Theory of Absolute

question 32

Multiple Choice

Which of the following is true about the theory of absolute advantage?

• A) The theory accepts the mercantilist idea that international trade is a zero-sum game.
• B) The theory approves the objective of national governments to acquire wealth through restrictive trade policies.
• C) The theory emphasizes that nations should open their doors to trade so that people can obtain more goods at cheaper rates.
• D) The theory measures a nation's wealth by how much gold and silver it has on reserve.

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Definitions:

Socially Optimal

A state or outcome in which the total benefits to society are maximized, taking into account all costs and benefits, both private and external.

Artificially Scarce Good

A good that is made scarce through artificial means such as through intellectual property rights or monopoly pricing, despite its capacity for abundant supply.

External Cost

An uncompensated cost that an individual or firm imposes on others; also known as negative externality.

Marginal Costs

The additional financial burden incurred from producing another unit of a product or service.