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IDENTIFICATION
TRUE OR FALSE
1. Opening a country to trade could increase a country's stock of resources as increased supplies
become available from abroad the efficiency of resource utilization and so free up resources for
other uses economic growth. ANSWER: TRUE
2. Ghana and South Korea, suppose that Ghana is more efficient at producing both cocoa and rice.
Suppose that in Ghana it takes 10 resources to produce one ton of cocoa, and 13 and one third
resources to produce one ton of rice. Ghana could produce 20 tons of cocoa and no rice, 15 tons
of rice and no cocoa, or some combination of the two. Now, suppose that in South Korea it takes
40 resources to produce one ton of cocoa and 20 resources to produce one ton of rice. South
Korea could use all its resources to produce 5 tons of cocoa and no rice, 10 tons of rice and no
cocoa, or some combination of the two. It’s still beneficial for Ghana to trade because it has an
absolute advantage in the production of cocoa. ANSWER: FALSE
3. One way that developed countries specialize to gain acquired advantages is by emphasizing
production in natural resource endowments. ANSWER: FALSE
4. As indicated by the diamond of national preferred standpoint hypothesis, the household
presence of every one of the four conditions best clarifies the situation of an item in its life
cycle. ANSWER: FALSE
5. Countries with large land areas are generally less dependent on trade than countries with small
land areas. ANSWER: TRUE
Multiple Choice
5. Neomercantilism describes the approach of countries that try to run a favorable balance
of trade to ______________. B
a. Build up gold reserves
b. Achieve a social or political objective
c. Lower their rates of inflation
d. buy raw materials more cheaply