Question 1

New trade theory suggests that nations

Accepted Answer

A)  increase their commitment to research and development. 
B)  adopt policies that promote strong competition within domestic markets. 
C)  cannot benefit from trade when they do not differ in resource endowments or technology. 
D)  may benefit from trade even when they do not differ in resource endowments or technology. 
A)  increase their commitment to research and development. 
B)  adopt policies that promote strong competition within domestic markets. 
C)  cannot benefit from trade when they do not differ in resource endowments or technology. 
D)  may benefit from trade even when they do not differ in resource endowments or technology.

Question 2

The theory of comparative advantage provides strong rationale for supporting the idea of

Accepted Answer

A)  business nationalism. 
B)  free trade. 
C)  protectionist trade policies. 
D)  governmental intervention in trade. 
A)  business nationalism. 
B)  free trade. 
C)  protectionist trade policies. 
D)  governmental intervention in trade.

Question 3

The main tenet of mercantilism is that it is in a country's best interests to

Accepted Answer

A)  maintain a trade deficit. 
B)  maintain a trade surplus. 
C)  import goods made from products that it does not have in abundance. 
D)  import more than it exports. 
A)  maintain a trade deficit. 
B)  maintain a trade surplus. 
C)  import goods made from products that it does not have in abundance. 
D)  import more than it exports.

Question 4

Explain how the principle of diminishing returns weakens the Ricardian model.

Accepted Answer

Diminishing returns show that it is not

Question 5

Explain the concept of free trade.

Accepted Answer

Free trade refers to a situation where a

Question 6

Which of the following theories emphasizes the interplay between the proportions in which the factors of production are available in different countries and the proportions in which they are needed for producing particular goods?

Accepted Answer

A)  Porter's theory 
B)  Smith's theory 
C)  Ricardo's theory 
D)  Heckscher-Ohlin theory 
A)  Porter's theory 
B)  Smith's theory 
C)  Ricardo's theory 
D)  Heckscher-Ohlin theory

Question 7

According to the new trade theory, firms that establish a first-mover advantage with regard to the production of a particular new product may subsequently dominate global trade in that product.

Accepted Answer

A) True 
 B)False

Question 8

The ________ argues that a large proportion of the world's new products had been developed by U.S. firms.

Accepted Answer

A)  product life-cycle theory 
B)  Porter's diamond 
C)  new trade theory 
D)  Leontief paradox 
A)  product life-cycle theory 
B)  Porter's diamond 
C)  new trade theory 
D)  Leontief paradox

Question 9

Which of the following terms refers to the unit cost reductions associated with large sized outputs?

Accepted Answer

A)  absolute advantage of production 
B)  economies of scale 
C)  constant marginal returns 
D)  diminishing marginal returns 
A)  absolute advantage of production 
B)  economies of scale 
C)  constant marginal returns 
D)  diminishing marginal returns

Question 10

Country A can produce product X, but it can also buy it at a cheap rate from Country B. Which of the following courses of action is suitable in this situation according to Adam Smith's theory of absolute advantage?

Accepted Answer

A)  Country A should import product X from Country B and it should not attempt to produce it at home. 
B)  Country A should partly import the product and produce it domestically. 
C)  Country A should produce more of product X and should attempt to obtain an absolute advantage for the product. 
D)  Country A should subsidize the production of product X to obtain an absolute advantage over Country B. 
A)  Country A should import product X from Country B and it should not attempt to produce it at home. 
B)  Country A should partly import the product and produce it domestically. 
C)  Country A should produce more of product X and should attempt to obtain an absolute advantage for the product. 
D)  Country A should subsidize the production of product X to obtain an absolute advantage over Country B.

Question 11

Factor endowments refer to the extent to which a country

Accepted Answer

A)  supports education, research, and development. 
B)  develops the infrastructure to support industrialism. 
C)  supports free trade. 
D)  has such resources as land, labor, and capital. 
A)  supports education, research, and development. 
B)  develops the infrastructure to support industrialism. 
C)  supports free trade. 
D)  has such resources as land, labor, and capital.

Question 12

Explain how the theories of trade differ in terms of their support to governmental intervention.

Accepted Answer

The theories of Smith, Ricardo, and Heck

Question 13

Do you think a new trade theorist would stress the role of luck and entrepreneurship? Explain.

Accepted Answer

Perhaps the most contentious implication

Question 14

Which of the following theories stress the role of luck, entrepreneurship, and innovation in the production and export of a good or service by the firms in a country?

Accepted Answer

A)  product life-cycle theory 
B)  Ricardo's theory 
C)  theory of comparative advantage 
D)  new trade theory 
A)  product life-cycle theory 
B)  Ricardo's theory 
C)  theory of comparative advantage 
D)  new trade theory

Question 15

Country A exports electronic goods from Country B although there are no underlying differences in factor endowments between the two countries. Which of the following theories explains this anomaly?

Accepted Answer

A)  comparative advantage theory 
B)  new trade theory 
C)  Ricardo's theory 
D)  Smith's theory 
A)  comparative advantage theory 
B)  new trade theory 
C)  Ricardo's theory 
D)  Smith's theory

Question 16

Which of the following is a flaw associated with mercantilism?

Accepted Answer

A)  Mercantilists do not support government intervention in trade. 
B)  Mercantilists view trade as a zero-sum game. 
C)  Mercantilists recommend policies to maximize imports. 
D)  Mercantilists recommend countries maintain a negative trade balance. 
A)  Mercantilists do not support government intervention in trade. 
B)  Mercantilists view trade as a zero-sum game. 
C)  Mercantilists recommend policies to maximize imports. 
D)  Mercantilists recommend countries maintain a negative trade balance.

Question 17

The simple comparative advantage model assumed that trade

Accepted Answer

A)  changes efficiency with which a country utilizes resources. 
B)  changes a country's stock of resources. 
C)  allows for dynamic changes in the marketplace. 
D)  does not change a country's stock of resources. 
A)  changes efficiency with which a country utilizes resources. 
B)  changes a country's stock of resources. 
C)  allows for dynamic changes in the marketplace. 
D)  does not change a country's stock of resources.

New trade theory suggests that nations

The theory of comparative advantage provides strong rationale for supporting the idea of

The main tenet of mercantilism is that it is in a country's best interests to

Explain how the principle of diminishing returns weakens the Ricardian model.

Explain the concept of free trade.

Which of the following theories emphasizes the interplay between the proportions in which the factors of production are available in different countries and the proportions in which they are needed for producing particular goods?

According to the new trade theory, firms that establish a first-mover advantage with regard to the production of a particular new product may subsequently dominate global trade in that product.

The ________ argues that a large proportion of the world's new products had been developed by U.S. firms.

Which of the following terms refers to the unit cost reductions associated with large sized outputs?

Country A can produce product X, but it can also buy it at a cheap rate from Country B. Which of the following courses of action is suitable in this situation according to Adam Smith's theory of absolute advantage?

Factor endowments refer to the extent to which a country

Explain how the theories of trade differ in terms of their support to governmental intervention.

Do you think a new trade theorist would stress the role of luck and entrepreneurship? Explain.

Which of the following theories stress the role of luck, entrepreneurship, and innovation in the production and export of a good or service by the firms in a country?

Country A exports electronic goods from Country B although there are no underlying differences in factor endowments between the two countries. Which of the following theories explains this anomaly?

Which of the following is a flaw associated with mercantilism?

The simple comparative advantage model assumed that trade

Globalization

National Differences in Political, Economic, and Legal Systems

National Differences in Economic Development

Differences in Culture

Ethics, Corporate Social Responsibility, and Sustainability

Government Policy and International Trade

Foreign Direct Investment

Regional Economic Integration

The Foreign Exchange Market

The International Monetary System

The Global Capital Market

The Strategy of International Business

The Organization of International Business

Entry Strategy and Strategic Alliances

Exporting, Importing, and Countertrade

Global Production and Supply Chain Management

Global Marketing and R&D

Global Human Resource Management

Accounting and Finance in the International Business

Filters

Exam 6: International Trade Theory

New trade theory suggests that nations

The theory of comparative advantage provides strong rationale for supporting the idea of

The main tenet of mercantilism is that it is in a country's best interests to

Explain how the principle of diminishing returns weakens the Ricardian model.

Explain the concept of free trade.

Which of the following theories emphasizes the interplay between the proportions in which the factors of production are available in different countries and the proportions in which they are needed for producing particular goods?

According to the new trade theory, firms that establish a first-mover advantage with regard to the production of a particular new product may subsequently dominate global trade in that product.

The ________ argues that a large proportion of the world's new products had been developed by U.S. firms.

Which of the following terms refers to the unit cost reductions associated with large sized outputs?

Country A can produce product X, but it can also buy it at a cheap rate from Country B. Which of the following courses of action is suitable in this situation according to Adam Smith's theory of absolute advantage?

Factor endowments refer to the extent to which a country

Explain how the theories of trade differ in terms of their support to governmental intervention.

Do you think a new trade theorist would stress the role of luck and entrepreneurship? Explain.

Which of the following theories stress the role of luck, entrepreneurship, and innovation in the production and export of a good or service by the firms in a country?

Country A exports electronic goods from Country B although there are no underlying differences in factor endowments between the two countries. Which of the following theories explains this anomaly?

Which of the following is a flaw associated with mercantilism?

The simple comparative advantage model assumed that trade

Globalization

National Differences in Political, Economic, and Legal Systems

National Differences in Economic Development

Differences in Culture

Ethics, Corporate Social Responsibility, and Sustainability

Government Policy and International Trade

Foreign Direct Investment

Regional Economic Integration

The Foreign Exchange Market

The International Monetary System

The Global Capital Market

The Strategy of International Business

The Organization of International Business

Entry Strategy and Strategic Alliances

Exporting, Importing, and Countertrade

Global Production and Supply Chain Management

Global Marketing and R&D

Global Human Resource Management

Accounting and Finance in the International Business

Filters