Trade theories International Business Grade 12

Theory of Absolute advantage was developed by

• David Ricardo

• Adam Smith

• Michael Porter

• Mr Preston

Theory of Comparative advantage was developed by

• David Ricardo

• Adam Smith

• Michael Porter

• Mr Preston

To focus on producing one thing to improve productivity is known as

• International Trade

• Specilisation

• Absolute Advantage

• Supply and Demand

When determining comparative advantage one must determine

• Opportunity Cost

• Absolute Advantage

• Specilisation

• International Trade

1. Mercantilism is the earliest theories on international trade.

• TRUE

• FALSE

Countries adopting mercantilism:

• favour trade surplus

• favour trade deficit

• encourage import more than export

• encourage export more than import

The followings are true about Mercantilism EXCEPT:

• It believes that national prosperity is the result of a positive balance of trade.

• It lead to a situation of zero sum game for some nations.

• The mercantilist government see import as good and export as bad.

• Mercantilist countries colonized other countries to gain resources and market finished goods.

Absolute advantage theory was proposed by ________ in 1776.

• David Ricardo

• Adam Smith

• John Dunning

• Karl Marx

Based on absolute advantage theory, each country can increase its wealth by specializing in the production of good that it is less efficient at.

• TRUE

• FALSE

Comparative advantage theory was proposed by ________ in 1817

• Adam Smith

• John Dunning

• Eli Hecksher

• David Ricardo