Exam 5: International Trade

Adam Smith developed the theory of comparative advantage in 1776.

Discuss the concept of absolute advantage using an example.

When there are gains to be had by both countries party to an exchange, international trade is considered a ________.

The ________ theory states that a nation's competitiveness in an industry depends on the capacity of the industry to innovate and upgrade.

When a nation can only increase its share of wealth at the expense of its neighbors, it is called a ________.

The ability of a nation to produce a good more efficiently than any other nation is called a comparative advantage.

Factor proportions theory says that a country will produce and export goods that require resources (factors) that are abundant and import goods that require resources in short supply.

Describe the volume and overall patterns of international trade.

The highly competitive nature of Asian business means that the use of cold calling to make direct contact with other companies is a common and successful business practice.

________ argues that trade is still beneficial even if one country is less efficient in the production of two goods, as long as it is less inefficient in the production of one of the goods.

The international product life cycle theory states that in the maturing product stage, production facilities are introduced in countries with the highest demand.

Countries did all of the following to implement mercantilism EXCEPT ________.

________ theory breaks a nation's resources into two categories: (1) labor, and (2) land and capital equipment.

According to Adam Smith, international trade should be restricted by tariffs and quotas to give a country an absolute advantage.

The theory of absolute advantage destroys the mercantilist idea that international trade is a zero-sum game.

Which of the following refers to the ability of a nation to produce a good more efficiently than any other nation?

Whereas comparative advantage theory focuses on the productivity of the production process for a particular good, factor proportions theory argues that a country specializes in producing and exporting goods using the factors of production that are most abundant.

In mercantilism, trade deficits were highly encouraged.

National competitive advantage theory states that a nation's competitiveness in an industry depends on the capacity of the industry to innovate and upgrade.

The economic and strategic advantage gained by being the first company to enter an industry is called a ________.