Exam 6: International Trade Theory

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?

Companies that trade small volumes of product can benefit from economies of scale.

Which of the following is a major benefit of engaging in free trade?

When a country runs a current account deficit, what happens to the money that flows to other countries?

The product life-cycle theory argues that the developing nations will not produce a product if the product is highly standardized.

According to Ricardo's theory of comparative advantage, a country should produce goods:

According to Ricardo's theory of comparative advantage, countries shall not produce a good, even if they have an absolute advantage in its production, if they do not produce it efficiently.

New trade theorists stress the role of luck in giving a firm first-mover advantages.

Wal-Mart makes bulk purchases from its vendors and hence it is able to get better deals than its competitors. This allows Wal-Mart to offer greater discounts to its customers. In this case, Wal-Mart benefits from _____.

The simple comparative advantage model assumed that trade:

A country's balance-of-payments accounts keep track of the:

Identify the theory that argues that advanced nations have an incentive to develop a new offering and hence such nations always tend to create a good or service for the first time.

Resources always move easily from one economic activity to another.

Heckscher-Ohlin theory supports the case for unrestricted free trade between nations.

Some of the arguments made by the product life-cycle theory seem ethnocentric and increasingly dated when viewed from an Asian or European perspective.

According to Adam Smith, a country should specialize in the production of a good when it has:

Which of the following is a major limitation of the simple Ricardian model of comparative advantage?

The _____ theory was based on the observation that for most of the twentieth century a very large proportion of the world's new products had been developed by U.S. firms and sold first in the U.S. market.

Diminishing returns to specialization occurs when:

Which of the following terms refers to the extent to which a country is gifted with such resources as land, labor, and capital?