Question 1

Identify the theory that supports the view that, in some cases, countries export for the reason that the world market can support only a limited number of firms.

Accepted Answer

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

Question 2

Which of the following is one of the four attributes present in Porter's diamond?

Accepted Answer

A)  Economies of scale 
B)  Factor endowments 
C)  Structural innovation 
D)  Procedural innovation 
A)  Economies of scale 
B)  Factor endowments 
C)  Structural innovation 
D)  Procedural innovation

Question 3

What will happen, according to Paul Samuelson's critique, if a rich country enters into a free trade agreement with a poor country?

Accepted Answer

A)  Both the countries will incur losses due to the exchanges between them. 
B)  The productivity of the poor country will decline rapidly. 
C)  The poor country will rapidly improve its productivity. 
D)  Both the countries will garner benefits from the exchanges between them. 
A)  Both the countries will incur losses due to the exchanges between them. 
B)  The productivity of the poor country will decline rapidly. 
C)  The poor country will rapidly improve its productivity. 
D)  Both the countries will garner benefits from the exchanges between them.

Question 4

The simple model of free trade assumed away transportation costs between countries.

Accepted Answer

A) True 
 B)False

Question 5

Explain the Paul Samuelson's critique.

Accepted Answer

Paul Samuelson's critique looks at what

Question 6

_____ refers to a situation where a government does not attempt to influence through quotas or duties what its citizens can buy from another country.

Accepted Answer

A)  Fair trade 
B)  Trade theory 
C)  Free trade 
D)  Mercantilism 
A)  Fair trade 
B)  Trade theory 
C)  Free trade 
D)  Mercantilism

Question 7

Which of the following is a major 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 to 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 to maintain a negative trade balance.

Question 8

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 9

According to Paul Samuelson's critique, a poor country will rapidly improve its productivity if a rich country enters into a free trade agreement with it.

Accepted Answer

A) True 
 B)False

Question 10

Explain the concept of free trade.

Accepted Answer

Free trade refers to a situation where a

Question 11

Explain Smith's theory of absolute advantage.

Accepted Answer

A country has an absolute advantage in t

Question 12

Paul Samuelson's critique argues that:

Accepted Answer

A)  when a rich country enters into a free trade agreement with a poor country, only the poor country benefits from the relationship. 
B)  trade is a positive-sum game in which all countries that participate realize economic gains. 
C)  when a rich country enters into a free trade agreement with a poor country, only the rich country benefits from the relationship. 
D)  trade is a net-sum game in which all countries that participate realize economic gains. 
A)  when a rich country enters into a free trade agreement with a poor country, only the poor country benefits from the relationship. 
B)  trade is a positive-sum game in which all countries that participate realize economic gains. 
C)  when a rich country enters into a free trade agreement with a poor country, only the rich country benefits from the relationship. 
D)  trade is a net-sum game in which all countries that participate realize economic gains.

Question 13

Heckscher-Ohlin theory stresses that comparative advantage arises from differences in productivity.

Accepted Answer

A) True 
 B)False

Question 14

Which of the following statements is true of the Leontief Paradox?

Accepted Answer

A)  It shows an anomaly that occurs when a nation has high domestic demand for a product. 
B)  It explains the relationship between domestic demand and comparative advantage. 
C)  It disproved Ricardo's theory of comparative advantage. 
D)  It raised questions about the validity of the Heckscher-Ohlin theory. 
A)  It shows an anomaly that occurs when a nation has high domestic demand for a product. 
B)  It explains the relationship between domestic demand and comparative advantage. 
C)  It disproved Ricardo's theory of comparative advantage. 
D)  It raised questions about the validity of the Heckscher-Ohlin theory.

Question 15

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

Accepted Answer

Diminishing returns show that it is not

Question 16

Company A entered the production of office software before its competitors. Because of this, the company's products are more familiar among and favored by customers. This situation exemplifies the _____.

Accepted Answer

A)  first-mover advantage 
B)  diminishing marginal returns 
C)  economies of scale 
D)  constant marginal returns 
A)  first-mover advantage 
B)  diminishing marginal returns 
C)  economies of scale 
D)  constant marginal returns

Question 17

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 18

The Heckscher-Ohlin theory predicts that countries will:

Accepted Answer

A)  export those goods that make intensive use of factors that are locally scarce. 
B)  export those goods that make intensive use of factors that are locally abundant. 
C)  import those goods that make intensive use of factors that are locally abundant. 
D)  import those goods that make intensive use of factors that are available world-wide. 
A)  export those goods that make intensive use of factors that are locally scarce. 
B)  export those goods that make intensive use of factors that are locally abundant. 
C)  import those goods that make intensive use of factors that are locally abundant. 
D)  import those goods that make intensive use of factors that are available world-wide.

Question 19

The production possibility frontier will be _____ if constant return to specialization is observed.

Accepted Answer

A)  convex 
B)  parabolic 
C)  a straight line 
D)  logarithmic 
A)  convex 
B)  parabolic 
C)  a straight line 
D)  logarithmic

Question 20

According to Ricardo's theory of comparative advantage, countries should:

Accepted Answer

A)  specialize in the production of those goods that it produces most efficiently. 
B)  specialize in the production of those goods that their competitors in the world market currently have monopolies on. 
C)  produce all the products for which they have an absolute advantage. 
D)  produce only the products for which they have an absolute advantage. 
A)  specialize in the production of those goods that it produces most efficiently. 
B)  specialize in the production of those goods that their competitors in the world market currently have monopolies on. 
C)  produce all the products for which they have an absolute advantage. 
D)  produce only the products for which they have an absolute advantage.

Identify the theory that supports the view that, in some cases, countries export for the reason that the world market can support only a limited number of firms.

Which of the following is one of the four attributes present in Porter's diamond?

What will happen, according to Paul Samuelson's critique, if a rich country enters into a free trade agreement with a poor country?

The simple model of free trade assumed away transportation costs between countries.

Explain the Paul Samuelson's critique.

_____ refers to a situation where a government does not attempt to influence through quotas or duties what its citizens can buy from another country.

Which of the following is a major flaw associated with mercantilism?

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?

According to Paul Samuelson's critique, a poor country will rapidly improve its productivity if a rich country enters into a free trade agreement with it.

Explain the concept of free trade.

Explain Smith's theory of absolute advantage.

Paul Samuelson's critique argues that:

Heckscher-Ohlin theory stresses that comparative advantage arises from differences in productivity.

Which of the following statements is true of the Leontief Paradox?

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

Company A entered the production of office software before its competitors. Because of this, the company's products are more familiar among and favored by customers. This situation exemplifies the _____.

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?

The Heckscher-Ohlin theory predicts that countries will:

The production possibility frontier will be _____ if constant return to specialization is observed.

According to Ricardo's theory of comparative advantage, countries should:

Globalization

National Differences in Political Economy, 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 Trade Pacts Give the Mexican Auto Industry an Edge

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 RD

Global Human Resource Management

Accounting and Finance in the International Business

Filters

Exam 6: International Trade Theory

Identify the theory that supports the view that, in some cases, countries export for the reason that the world market can support only a limited number of firms.

Which of the following is one of the four attributes present in Porter's diamond?

What will happen, according to Paul Samuelson's critique, if a rich country enters into a free trade agreement with a poor country?

The simple model of free trade assumed away transportation costs between countries.

Explain the Paul Samuelson's critique.

_____ refers to a situation where a government does not attempt to influence through quotas or duties what its citizens can buy from another country.

Which of the following is a major flaw associated with mercantilism?

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?

According to Paul Samuelson's critique, a poor country will rapidly improve its productivity if a rich country enters into a free trade agreement with it.

Explain the concept of free trade.

Explain Smith's theory of absolute advantage.

Paul Samuelson's critique argues that:

Heckscher-Ohlin theory stresses that comparative advantage arises from differences in productivity.

Which of the following statements is true of the Leontief Paradox?

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

Company A entered the production of office software before its competitors. Because of this, the company's products are more familiar among and favored by customers. This situation exemplifies the _____.

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?

The Heckscher-Ohlin theory predicts that countries will:

The production possibility frontier will be _____ if constant return to specialization is observed.

According to Ricardo's theory of comparative advantage, countries should:

Globalization

National Differences in Political Economy, 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 Trade Pacts Give the Mexican Auto Industry an Edge

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 RD

Global Human Resource Management

Accounting and Finance in the International Business

Filters