Exam 6: International Trade and Factor Mobility Theory

Assume the following conditions: In the United States it takes 4 units of resources to produce a ton of potatoes and 5 to produce a ton of coal. In Canada it takes 6 units of resources to produce a ton of potatoes and 10 to produce a ton of coal. According to the theory of comparative advantage,________.

Comparative advantage differs from absolute advantage in that the former ________,whereas the latter ________.

As an international business manager,how can you benefit from an understanding of international trade theories?

Under mercantilism,governments sought to influence trade by ________.

What assumptions underlie the theories of specialization in international trade? What are the limitations of these assumptions?

The trade theory that says countries should concentrate production on those products using their most abundant production factors is the ________.

The free trade theories of specialization assume that countries will be better off even though some people are unemployed.

The trade theory that says a country should export more than it imports is known as ________.

Because all countries face the questions of what,how much,and with whom they should import and export,international business managers should most likely ________.

According to the theory of comparative advantage,a country gains from foreign trade even though it may have an absolute advantage in the production of all products because ________.

The most internationally mobile factor of production is ________.

From an economic standpoint,why do production factors move from one country to another? How does factor movement affect international trade?

Eight of the top 10 exporting and importing countries are countries with ________.

The term brain drain describes the export of high-technology products in exchange for low-technology products.

According to Adam Smith's theory of absolute advantage,specialization allows countries to increase their efficiency for each of the following reasons EXCEPT ________.

Countries with large land areas are generally less dependent on trade than countries with small land areas because of ________.

The growth of small-scale production technology will most likely enable small countries to produce products efficiently for their own consumption.

According to the PLC theory of trade,most new products are produced in countries where wage rates are low.

Companies and individuals transfer capital internationally primarily because of expectations of earning higher returns.

Why is the United States both an exporter and importer of such products as vehicles and passenger aircraft?