Question 1

Briefly explain Vernon's product life-cycle theory.

Accepted Answer

Vernon's theory was based on the observa

Question 2

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

Accepted Answer

A) True 
 B)False

Question 3

Explain how the rivalry within an industry affects international competence.

Accepted Answer

Porter's second point is that there is a

Question 4

The theory of comparative advantage suggests that trade is a positive-sum game in which all countries that participate realize economic gains.

Accepted Answer

A) True 
 B)False

Question 5

What are the assumptions that we make when we discuss a simple Ricardian model to support free trade?

Accepted Answer

1. We have assumed a simple world in whi

Question 6

New trade theory stresses that in some cases countries specialize in the production and export of particular products because the world market can support only a limited number of firms.

Accepted Answer

A) True 
 B)False

Question 7

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 8

Economies of scale are unit cost reductions associated with a large scale of output.

Accepted Answer

A) True 
 B)False

Question 9

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 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

Which of the following is a statement that supports the theory of comparative advantage?

Accepted Answer

A)  International trade is a zero-sum gain where one nation's gain is another's loss. 
B)  Domestic industries are at risk when a country engages in free trade. 
C)  A country should maintain trade surplus to succeed in global trade. 
D)  Global production is greater with free trade than it is with restricted trade. 
A)  International trade is a zero-sum gain where one nation's gain is another's loss. 
B)  Domestic industries are at risk when a country engages in free trade. 
C)  A country should maintain trade surplus to succeed in global trade. 
D)  Global production is greater with free trade than it is with restricted trade.

Question 12

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

Accepted Answer

A) True 
 B)False

Question 13

From a profit perspective, it makes sense for firms to disperse their productive activities to those countries where they can be performed most efficiently.

Accepted Answer

A) True 
 B)False

Question 14

Porter argues that a nation's firms gain competitive advantage if ____.

Accepted Answer

A)  their domestic consumers lack technical awareness 
B)  they function in a labor intensive market 
C)  the country has abundant supply of unskilled workers 
D)  their domestic consumers are demanding 
A)  their domestic consumers lack technical awareness 
B)  they function in a labor intensive market 
C)  the country has abundant supply of unskilled workers 
D)  their domestic consumers are demanding

Question 15

Diminishing returns show that it is feasible for a country to specialize to the degree suggested by the simple Ricardian model.

Accepted Answer

A) True 
 B)False

Question 16

Ricardo's theory makes fewer simplifying assumptions compared to Heckscher-Ohlin theory.

Accepted Answer

A) True 
 B)False

Question 17

The theories of international trade claim that promoting free trade is generally in the best interests of an individual firm, although it may not always be in the best interest of a country.

Accepted Answer

A) True 
 B)False

Question 18

Country X, a poor country, invents a revolutionary electronic product. The country markets this new product in other poor countries to garner large profits. This occurrence is against the idea of ____.

Accepted Answer

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

Question 19

Which of the following observations is consistent with Michael Porter's theory of national competitive advantage?

Accepted Answer

A)  Factors such as domestic demand and domestic rivalry determine nations' dominance on production. 
B)  Countries should produce only those goods for which they have a comparative advantage. 
C)  Interplay between the factors of production cause international marketing decisions. 
D)  International differences in labor productivity determine nations' supremacy in production. 
A)  Factors such as domestic demand and domestic rivalry determine nations' dominance on production. 
B)  Countries should produce only those goods for which they have a comparative advantage. 
C)  Interplay between the factors of production cause international marketing decisions. 
D)  International differences in labor productivity determine nations' supremacy in production.

Question 20

According to Ricardo's theory of comparative advantage, countries should produce all the products for which they have an absolute advantage.

Accepted Answer

A) True 
 B)False

Briefly explain Vernon's product life-cycle theory.

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

Explain how the rivalry within an industry affects international competence.

The theory of comparative advantage suggests that trade is a positive-sum game in which all countries that participate realize economic gains.

What are the assumptions that we make when we discuss a simple Ricardian model to support free trade?

New trade theory stresses that in some cases countries specialize in the production and export of particular products because the world market can support only a limited number of firms.

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

Economies of scale are unit cost reductions associated with a large scale of output.

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?

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?

Which of the following is a statement that supports the theory of comparative advantage?

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

From a profit perspective, it makes sense for firms to disperse their productive activities to those countries where they can be performed most efficiently.

Porter argues that a nation's firms gain competitive advantage if ____.

Diminishing returns show that it is feasible for a country to specialize to the degree suggested by the simple Ricardian model.

Ricardo's theory makes fewer simplifying assumptions compared to Heckscher-Ohlin theory.

The theories of international trade claim that promoting free trade is generally in the best interests of an individual firm, although it may not always be in the best interest of a country.

Country X, a poor country, invents a revolutionary electronic product. The country markets this new product in other poor countries to garner large profits. This occurrence is against the idea of ____.

Which of the following observations is consistent with Michael Porter's theory of national competitive advantage?

According to Ricardo's theory of comparative advantage, countries should produce all the products for which they have an absolute advantage.

Globalization

National Differences in Political Economy

Political Economy and Economic Development

Differences in Culture

Ethics in International Business

The Political Economy of 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, Outsourcing, and Logistics

Global Marketing and RD

Global Human Resource Management

Accounting and Finance in the International Business

Filters

Exam 6: International Trade Theory

Briefly explain Vernon's product life-cycle theory.

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

Explain how the rivalry within an industry affects international competence.

The theory of comparative advantage suggests that trade is a positive-sum game in which all countries that participate realize economic gains.

What are the assumptions that we make when we discuss a simple Ricardian model to support free trade?

New trade theory stresses that in some cases countries specialize in the production and export of particular products because the world market can support only a limited number of firms.

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

Economies of scale are unit cost reductions associated with a large scale of output.

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?

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?

Which of the following is a statement that supports the theory of comparative advantage?

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

From a profit perspective, it makes sense for firms to disperse their productive activities to those countries where they can be performed most efficiently.

Porter argues that a nation's firms gain competitive advantage if ____.

Diminishing returns show that it is feasible for a country to specialize to the degree suggested by the simple Ricardian model.

Ricardo's theory makes fewer simplifying assumptions compared to Heckscher-Ohlin theory.

The theories of international trade claim that promoting free trade is generally in the best interests of an individual firm, although it may not always be in the best interest of a country.

Country X, a poor country, invents a revolutionary electronic product. The country markets this new product in other poor countries to garner large profits. This occurrence is against the idea of ____.

Which of the following observations is consistent with Michael Porter's theory of national competitive advantage?

According to Ricardo's theory of comparative advantage, countries should produce all the products for which they have an absolute advantage.

Globalization

National Differences in Political Economy

Political Economy and Economic Development

Differences in Culture

Ethics in International Business

The Political Economy of 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, Outsourcing, and Logistics

Global Marketing and RD

Global Human Resource Management

Accounting and Finance in the International Business

Filters