Exam 6: International Trade Theory

First-mover advantages are the economic and strategic advantages that accrue to early entrants into an industry.

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

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.

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

New trade theory suggests that nations cannot benefit from trade when they do not differ in resource endowments or technology.

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

Which of the following arguments supports the Paul Samuelson's critique?

What is the main principle of mercantilism?

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.

Explain the Paul Samuelson's critique.

The Heckscher-Ohlin theory predicts that countries will export those goods that make intensive use of factors that are locally scarce.

Which of the following is the reason why most economists prefer Heckscher-Ohlin theory to Ricardo's theory?

Adam smith argued that countries should specialize in the production of goods for which they have an absolute advantage.

The simple comparative advantage model assumed that trade does not change a country's stock of resources or the efficiency with which it utilizes those resources.

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

Which of the following is an example of a basic factor that a nation will possess as proposed by Porter?

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

Explain the concept of free trade.

What are first-mover advantages?

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.