Question Details

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

Options

A

Difference in national resources

B

Stage of economic development

C

Extent of foreign investment

D

Even distribution of resources

Show Answer

Correct Answer :

Option D

Even distribution of resources

Solution :

The correct option is Even distribution of resources.

International trade arises primarily due to differences and inequalities among nations, which create opportunities for mutually beneficial exchange. Let's analyze the factors that form the basis of international trade to understand why an even distribution is NOT one of them:

1. Difference in national resources: Countries are endowed with different natural resources, climate conditions, and geographical advantages. For example, some nations have abundant oil reserves, while others possess rich agricultural land. This unevenness compels countries to trade with one another to obtain resources they lack.

2. Stage of economic development: The nature and structure of items traded depend greatly on a country's economic development. Industrially advanced nations export machinery and high-tech goods, whereas developing or agrarian economies often export raw materials and agricultural commodities.

3. Extent of foreign investment: Foreign direct investment (FDI) can boost a country's capacity to produce specific industrial goods, developing specializations that enhance export capabilities and drive trade between nations.

4. Even distribution of resources: If resources, technology, and labor skills were distributed perfectly evenly across all nations, every country would be self-sufficient and capable of producing all goods at similar costs. Under such hypothetical conditions, the primary economic incentive or basis for international trade would cease to exist. Therefore, an even distribution of resources is NOT a basis for international trade.

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