Which of the following is a true statement about mercantilism?

• A. Mercantilism advocates for government intervention to promote exports and restrict imports.
• B. Mercantilism supports free trade and minimal government involvement in the economy.
• C. Mercantilism encourages countries to specialize according to their comparative advantage.
• D. Mercantilism emphasizes the importance of consumer sovereignty in determining production.

Answer: (A)

Verified step by step guidance

1. Step 1: Understand the definition of mercantilism. Mercantilism is an economic theory and practice dominant in Europe from the 16th to 18th centuries, which emphasizes the role of the state in managing the economy to increase national wealth, primarily through accumulating precious metals and maintaining a favorable balance of trade.
2. Step 2: Recognize that mercantilism advocates for government intervention. This includes policies that promote exports and restrict imports to ensure that more money flows into the country than out, thereby increasing national wealth.
3. Step 3: Contrast mercantilism with free trade principles. Mercantilism does not support free trade or minimal government involvement; instead, it favors protectionist policies such as tariffs, quotas, and subsidies to protect domestic industries.
4. Step 4: Understand that mercantilism does not emphasize comparative advantage. The idea of countries specializing based on comparative advantage is a concept from classical economics, particularly from David Ricardo, which came after mercantilism.
5. Step 5: Note that mercantilism does not focus on consumer sovereignty. Instead, it prioritizes national economic strength and accumulation of wealth over consumer preferences or market-driven production decisions.