The republic of monaslu has the world's most efficient car manufacturing industry, while the country of ingora has the world's most efficient electronics industry. the republic of monaslu trades cars with ingora in exchange for consumer electronics. this form of trade between the two countries illustrates multiple choice
a. the heckscher-ohlin theory.
b. the mercantilist doctrine. a zero-sum game.
c. the product life-cycle theory.
d. the theory of absolute advantage.

This form of trade between the two countries illustrates the Heckscher-Ohlin theory.

The Republic of Monaslu is exporting what it can most efficiently produce and the country of Ingora is exporting what it can most efficiently produce. They are also both importing goods that they need.

the Hecksher-Ohlin theory

This theory is based around the idea that countries should export goods or labor that they are the most efficient at producing. This efficiency also means that they should be able to easily turn a profit on these goods or services. Examples would be a country who has a great deal of oil reserves but not enough agriculture. The country would export its oil to then import agricultural products.

the mercantilist doctrine

This doctrine is in full support of domestic goods. The government regulates trade in such a way that promotes domestic goods over imports. Imported goods are heavily regulated through tariffs, while domestic goods are heavily protected.

the product life-cycle theory

This theory states that there are three stages in the life-cycle of a product that enters the market. The first stage is the product introduction. This stage is just as it sounds, the product enters the market. It first starts off in the local market with very little production because it is new and not well known. There are some changes made to the product to make it better and possibly less expensive to produce. As it becomes more popular production and distribution increases. The second stage is the maturity stage. The product is being distributed internationally. Changes to the products are still ongoing, but fewer. Production facilities are being built in various locations so as to produce locally and reduce cost. The last stage is product standardization and streamline of manufacturing. At this stage, the product has undergone it's final iteration. The production facilities are standardized so as to reduce cost. Also, other similar products have begun to flood the marketplace.

the theory of absolute advantage

This is when a producer can produce the same quantity and quality of goods or services as another producer for lesser cost. Therefore it is more efficient and cost effective so it is more profitable.

Level: College

Subject: Business

the Heckscher-Ohlin theory, the mercantilist doctrine, the product life-cycle theory, the theory of absolute advantage.

the Heckscher-Ohlin: link

Which of the following is NOT a proposition of the Heckscher-Ohlin model?: link

The option (a) is correct. The form of trade between the Republic of Monasula and country of Ingora is known as Heckscher-Ohlin theory.

Further Explanation:

Heckscher-Ohlin theory:

Heckscher-Ohlin theory is an economic theory. It showcases that the country should export the goods that can be produced effectively by the businesses established in the country. When a country produces goods effectively than other countries, then it should export that product to other countries provided that the country has satisfied its domestic demand for the product.

This theory also states that the country should import the goods which can not be effectively produced in the country. This theory benefits both the countries involved in the transactions. The countries would import the goods manufactured in the most effective manner, and it would export the goods that it produces excessively and efficiently.

In the given case, Republic of Monasula effectively produces cars and country of Ingora produces consumer electronics. They are exchanging their most effective products. This type of trade policy is known as the Heckscher-Ohlin theory.

Justification for the correct and incorrect option:

A.

The Heckscher-Ohlin theory: This is the correct option.

Both the countries are exchanging their most effective goods so the form of trade in known as Heckscher-Ohlin theory,

B.

The mercantilist doctrine: This is an incorrect option. Mercantilist doctrine does not appreciate the import of goods. Under this theory, the government of the country imposes tariffs and taxes on the import of the goods to promote the use of domestic goods. In the current case, both the countries are importing goods, so this trade policy will not be considered as mercantilist doctrine.

C.

The product life-cycle theory: This is an incorrect option. Product life-cycle theory divides the product into four parts based on the life of the product. There is no description of the life of the product in the given case. Therefore, the trade policy is not following the product life-cycle theory.

D.

The theory of absolute advantage: This is an incorrect option. This theory states that the country can produce a specific product with less effective cost.  

E.

Zero-sum game: This is an incorrect option.

This theory suggests that the profit and loss incurred a person are equal so that the net effect will be zero.

Learn more:

1.Learn more about the demand and supply of the product

link

2.Learn more about the competitive market

link

3.Learn more about the market intermediary

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Answer details:

Grade: Senior School

Subject: Economics

Chapter: Export & Import

Keywords: Republic, of Monaslu, efficient, car, manufacturing industry, Ingora has the world's electronics, industry. Trades, exchange, trade between the two countries, Multiple Choice, Heckscher-Ohlin theory, mercantilist doctrine. a zero-sum game, product life-cycle theory, theory of absolute advantage.

a. money supply  

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