Mercantilism is an economic theory stating that colonies should:

• A. encourage free trade with all nations
• B. focus on developing their own manufacturing industries
• C. provide raw materials to the mother country and serve as markets for its manufactured goods
• D. be economically independent from the mother country

Answer: (C)

Verified step by step guidance

1. Understand the historical context of mercantilism, which was an economic theory prevalent from the 16th to 18th centuries, focusing on the accumulation of wealth by the mother country through trade and colonization.
2. Recognize that mercantilism emphasized a positive balance of trade, where the mother country sought to export more than it imported to increase its wealth, often measured in gold and silver.
3. Identify the role of colonies under mercantilism: they were expected to supply raw materials to the mother country, which lacked these resources, and to serve as captive markets for the mother country's manufactured goods.
4. Note that mercantilism did not promote free trade with all nations or economic independence of colonies; instead, it encouraged controlled trade benefiting the mother country.
5. Summarize that the correct understanding of mercantilism is that colonies should provide raw materials to the mother country and serve as markets for its manufactured goods, supporting the mother country's economic interests.