Question

Which of the following is NOT the basis of international trade?

• A. Difference in national resources
• B. Stage of economic development
• C. Extent of foreign investment
• D. Even distribution of resources

Hint:

Remember that trade is driven by \textbf{differences}. Differences in resources, climate, skills, and costs create the reasons to buy and sell across borders. "Evenness" or "sameness" is the opposite of what drives trade.

Answer 1

The Correct Option is D

Step 1: Understanding the Concept:
International trade is the exchange of capital, goods, and services across international borders. The fundamental reason for trade is that countries have differences in what they can produce efficiently.
Step 2: Detailed Explanation:
Let's analyze the factors:
1. Difference in national resources: This is a primary basis for trade. A country rich in oil will export it, while a country with little oil will import it. This is based on the principle of absolute advantage.
2. Stage of economic development: Different stages of development lead to specialization. Developed countries might export high-tech goods and services, while developing countries might export raw materials or manufactured goods.
3. Extent of foreign investment: Foreign investment can create industries and infrastructure that boost a country's ability to export goods, thus forming a basis for trade.
4. Even distribution of resources: This is NOT a basis for trade. In fact, if all resources were distributed evenly, every country could produce everything it needs, and there would be very little incentive for international trade. The uneven distribution of resources is what drives trade.
Step 3: Final Answer:
An even distribution of resources would reduce or eliminate the need for trade, so it is not a basis for it.