The Republic of Argonia,owing to It's Vast Resources of Arable

question 16

Multiple Choice

The Republic of Argonia,owing to it's vast resources of arable land and fresh water,is an agrarian nation.It exports agricultural products and in turn imports products that it does not produce such as oil,machinery,computers,and electronic devices.The result is that it spends more on imports than what it gains from exports.Which of the following theories prohibits such international trade?

• A) New trade theory
• B) Product life-cycle theory
• C) Mercantilism
• D) Heckscher-Ohlin theory
• E) Theory of national competitive advantage

---

Definitions:

Perfect Competition

A theoretical market structure that features no barriers to entry, a large number of sellers and buyers, completely homogenous products, and perfect information available to all market participants.

Chronic Excess Capacity

A situation where industries consistently operate below their full output capacity due to prolonged demand shortfall.

Monopolistic Competition

A market structure characterized by many firms selling products that are similar but not identical, allowing for competition based on price, quality, and marketing.

Profit-Maximizing Quantity

The level of production at which a company can achieve the highest possible profit, balancing additional costs against additional revenues.