Question

Are the following statements true or false? Explain in each case.

Answer 1

Answer:

a. True

b. False

c. False

d. False

e. False

Explanation:

A. True. This is because  trade usually occurs when the two countries meet a mutual agreement that benefits them both. Resources are distributed round the world in an uneven manner, and no country has the highest concentration of every single resource or item of trade. Hence, countries cannot produce all goods in the same quantities, at the same cost. The concept of comparative advantage now has to come in. Countries know it is cheaper to buy from more established countries in the production of certain goods, than producing it themselves.Hence in that kind of trade, both parties will be gaining. The exporting country gains money, while the importer gains the service at a cheaper cost than producing it themselves.

B. False: Although talent is good, some tasks require specialized training to be able to perform effectively eg. surgery, writing, driving, financial accounting. There are some disciplines that do not emphasize talent, rather diligence and attentiveness. Hence, it is not possible for a talented person to have a comparative advantage in everything he does, because a lot of things do not require talent; rather they require diligence.

C. False: It is actually possible for a trade to be good for both parties involved. In fact, most of the time trade is done when there is mutual benefit between the two parties. Trade in which only one party is gaining is mostly done out of trickery, compulsion or threat. As a norm, rational trade is done under free will when both parties gain.

D. False: Sometimes, the deal can be bad for one of the parties. When this occurs under free will, it is mostly as a result of ignorance. Typical examples were seen during the era of geographical colonialism and slave trade. The communities that gave their people as slaves where being impoverished of their human capacity, for the exchange of physical commodities which turned out bad for them in future years to come.

E. False. This is not always the case. Trade done by a country sometimes affects the people in the country. for example, a country that exports a lot of fish, will most likely have high prices for fish in their local market, because

1. Fish is a scarce resource and they are limited in supply and hence cannot serve both the local and international markets effectively without proper regulation.

2. Most fishermen will like to export their fish to make more profit through economies of scale. as a result, this will create scarcity of fish in the local  region.

The scarcity will cause high local prices of fish  which will affect the poor masses in the country.

Hence, trade done by a country doesn't always benefit everyone in the country