Question 1

In Zombia,it takes 10 resources to produce 1 ton of cocoa and 13.5 resources to produce 1 ton of rice.In South Curmudgea,it takes 40 resources to produce 1 ton of cocoa and 20 resources to produce 1 ton of rice.Zombia has a comparative advantage over South Curmedgea in cocoa.This follows the theory of comparative advantage,and we can say that engaging in free trade benefits all countries that participate in it.Which of the following is an inaccurate assumption on which this conclusion is based?

Accepted Answer

A)  We have assumed constant returns to scale.
B)  We have assumed the prices of resources and exchange rates in the two countries are dynamic.
C)  We have assumed there are barriers to the movement of resources from the production of one good to another within the same country.
D)  We have assumed that agrarian nations do not specialize in producing fertilizers.
E)  We have assumed diminishing returns to specialization.F) A) and B)
G) B) and D)

Question 2

Which of the following factors is taken into consideration by David Ricardo's theory of comparative advantage in order to explain the pattern of international trade?

Accepted Answer

A)  absolute advantage of a country with reference to natural resources
B)  proportions in which the factors of production are available
C)  international differences in labor productivity
D)  ability of firms to cope with late-mover disadvantages
E)  ability of firms to capture first-mover advantagesF) A) and C)
G) B) and C)

Question 3

Porter argues that a nation's firms gain competitive advantage if their domestic consumers are

Accepted Answer

A)  sophisticated and demanding.
B)  price insensitive and trusting.
C)  accommodating and flexible.
D)  nationalistic and protective of their domestic industries.
E)  biased toward foreign products.F) A) and B)
G) B) and C)

Question 4

Which of the following is in a country's best interests,according to the main tenet of mercantilism?

Accepted Answer

A)  importing products from developing rather than developed countries
B)  importing products even if they are efficiently produced at home
C)  importing less specialized goods rather than attempting to make them at home
D)  minimizing exports and maximizing imports
E)  maintaining a trade surplusF) A) and B)
G) C) and D)

Question 5

Vernon argues that pioneering firms in the United States kept production facilities closer to the market and centers of decision making because

Accepted Answer

A)  of the uncertainty and risks inherent in introducing new products.
B)  they believed that foreign production facilities were inferior in technical skills.
C)  they believed that U.S.labor costs were much lower than those in foreign markets.
D)  the U.S.government was critical of outsourcing production to other countries.
E)  of the high trade barriers implemented by several Asian and European countries.F) A) and D)
G) C) and D)

Question 6

The new trade theory suggests that a country may predominate in the export of a good simply because it was lucky enough to have one or more pioneering firms to produce that good.

Accepted Answer

A) True 
 B)False

Question 7

Which of the following theories states that in those industries where the output required to attain economies of scale represents a significant proportion of total world demand,the global market may be able to support only a small number of enterprises?

Accepted Answer

A)  Heckscher-Ohlin
B)  comparative advantage
C)  product life-cycle
D)  new trade
E)  absolute advantageF) B) and E)
G) A) and E)

Question 8

One of the suggestions of new trade theory is that

Accepted Answer

A)  differences in technology leads to differences in productivity,which in turn,drives international trade patterns.
B)  nations may benefit from trade irrespective of resource endowments or technology.
C)  the demand for most new products tends to be based on nonprice factors.
D)  globally dispersed production reduces the production costs of mature products.
E)  comparative advantage does not arrive from a difference in factor endowments but from a difference in productivity.F) A) and E)
G) B) and C)

Question 9

New Zealand is the largest exporter of dairy products to the United States.The United States is the world's third largest supplier of machinery and exports heavy machinery to New Zealand.What explains the trade equation between New Zealand and the United States?

Accepted Answer

A)  Tariff barriers determine the flow of goods and services between nations.
B)  Countries are simultaneously encouraging exports and discouraging imports.
C)  First entrants to the industry ensure their nations have the first-mover advantages.
D)  Nations with an absolute advantage in producing certain goods trade them for goods produced by other countries.
E)  Gold and silver are the mainstays of national wealth and essential to vigorous commerce.F) B) and D)
G) B) and C)

Question 10

Which of the following formed the crux of Porter's study of national competitive advantage?

Accepted Answer

A)  identifying the various stages of the life cycle of a product
B)  determining why a country achieves international success in a particular industry
C)  determining how trade barriers affect the prices of products in the international market
D)  determining how pre-industrialization theories predict international trade patterns
E)  organizing the relationship between factor endowments and economies of scaleF) A) and D)
G) A) and E)

Question 11

The new trade theory states that

Accepted Answer

A)  the locus of global production initially switches from the United States to other advanced nations.
B)  world trade in certain products may be dominated by countries whose firms were first movers in their production.
C)  differences in technology may lead to differences in productivity,which in turn drives international trade patterns.
D)  differences in labor productivity between nations underlie the notion of comparative advantage.
E)  a rich country might actually be worse off by switching to a free trade regime with a poor nation.F) C) and D)
G) A) and B)

Question 12

Discuss Adam Smith's concept of absolute advantage.

Accepted Answer

According to Smith,countries should spec...

Question 13

If a company were to draw from the ideas proposed in the various theories of international trade,from a profit perspective,how would it go about selecting locations for its businesses?

Accepted Answer

A)  It would concentrate its productive activities mostly in developing countries.
B)  It would concentrate its productive activities in its home country.
C)  It would disperse its productive activities to those countries where they can be performed most efficiently.
D)  It would disperse its productive activities across all countries that serve as its market.
E)  It would concentrate its productive activities mostly in developed countries.F) All of the above
G) D) and E)

Question 14

Factor endowments refer to the extent to which free trade impacts the wealth of a country.

Accepted Answer

A) True 
 B)False

Question 15

Which of the following is an empirically supported prediction of new trade theory?

Accepted Answer

A)  Trade increases the specialization of production within an industry.
B)  Nations benefit from trade only when they differ in factor endowments.
C)  Government intervention and strategic trade policies are more likely to harm international trade than is free trade.
D)  The locus of global production initially switches from the United States to other advanced nations.
E)  Comparative advantage arises from differences in productivity and factor endowments.F) B) and E)
G) None of the above

Question 16

Sentoria is an island nation in the Pacific Ocean.Its geographical location is advantageous since it has access to a variety of aquatic life forms and also a number of freshwater sources that provide for fisheries.The lack of arable land drives local demand for seafood.The competition in the domestic fishing industry is fierce and enables Sentoria to be one of the major exporters of seafood.Which of the following theories of international trade best explains Sentoria's dominance as an exporter of seafood?

Accepted Answer

A)  new trade theory
B)  product life-cycle theory
C)  mercantilism
D)  Heckscher-Ohlin theory
E)  theory of national competitive advantageF) A) and B)
G) B) and D)

Question 17

According to Adam Smith,market mechanism,rather than government policy,should determine a country's imports and exports.

Accepted Answer

A) True 
 B)False

Question 18

Meitneria and Seaboria specialize in the production of heavy machinery and textiles respectively.While Meitneria doesn't produce textiles,Seaboria is not as technologically advanced as Meitneria.In this situation,according to the Heckscher-Ohlin theory

Accepted Answer

A)  Meitneria will import textiles from Seaboria and export heavy machinery to it.
B)  Meitneria will invest more than Seaboria in the production of textiles to exploit its comparative advantage.
C)  Meitneria and Seaboria will raise their trade barriers to protect their economies.
D)  Seaboria will recruit experts from Meitneria to specialize in the production of heavy machinery.
E)  Meitneria will recruit workers from Seaboria to improve its standing in the textile industry.F) B) and E)
G) C) and D)

Question 19

Mercantilism,propagated in the sixteenth and seventeenth centuries,advocated that countries should simultaneously encourage both imports and exports.

Accepted Answer

A) True 
 B)False

Question 20

Free trade is likely to increase a country's stock of resources and the efficiency with which it utilizes those resources.

Accepted Answer

A) True 
 B)False

Exam 6: International Trade Theory

Which of the following factors is taken into consideration by David Ricardo's theory of comparative advantage in order to explain the pattern of international trade?

Correct Answer
verified

The new trade theory suggests that a country may predominate in the export of a good simply because it was lucky enough to have one or more pioneering firms to produce that good.

Correct Answer
verified

Correct Answer
verified

Meitneria and Seaboria specialize in the production of heavy machinery and textiles respectively.While Meitneria doesn't produce textiles,Seaboria is not as technologically advanced as Meitneria.In this situation,according to the Heckscher-Ohlin theory

Correct Answer
verified

Which of the following theories states that in those industries where the output required to attain economies of scale represents a significant proportion of total world demand,the global market may be able to support only a small number of enterprises?

Correct Answer
verified

Which of the following formed the crux of Porter's study of national competitive advantage?

Correct Answer
verified

Vernon argues that pioneering firms in the United States kept production facilities closer to the market and centers of decision making because

Correct Answer
verified

If a company were to draw from the ideas proposed in the various theories of international trade,from a profit perspective,how would it go about selecting locations for its businesses?

Correct Answer
verified

Factor endowments refer to the extent to which free trade impacts the wealth of a country.

Correct Answer
verified

Free trade is likely to increase a country's stock of resources and the efficiency with which it utilizes those resources.

Correct Answer
verified

The new trade theory states that

Correct Answer
verified

Discuss Adam Smith's concept of absolute advantage.

Correct Answer
verified
According to Smith,countries should spec...
View Answer

New Zealand is the largest exporter of dairy products to the United States.The United States is the world's third largest supplier of machinery and exports heavy machinery to New Zealand.What explains the trade equation between New Zealand and the United States?

Correct Answer
verified

Mercantilism,propagated in the sixteenth and seventeenth centuries,advocated that countries should simultaneously encourage both imports and exports.

Correct Answer
verified

Which of the following is an empirically supported prediction of new trade theory?

Correct Answer
verified

Which of the following is in a country's best interests,according to the main tenet of mercantilism?

Correct Answer
verified

Correct Answer
verified

One of the suggestions of new trade theory is that

Correct Answer
verified

According to Adam Smith,market mechanism,rather than government policy,should determine a country's imports and exports.

Correct Answer
verified

Porter argues that a nation's firms gain competitive advantage if their domestic consumers are

Correct Answer
verified

Exam 6: International Trade Theory

Which of the following factors is taken into consideration by David Ricardo's theory of comparative advantage in order to explain the pattern of international trade?

Correct AnswerverifiedShow Answer

The new trade theory suggests that a country may predominate in the export of a good simply because it was lucky enough to have one or more pioneering firms to produce that good.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Meitneria and Seaboria specialize in the production of heavy machinery and textiles respectively.While Meitneria doesn't produce textiles,Seaboria is not as technologically advanced as Meitneria.In this situation,according to the Heckscher-Ohlin theory

Correct AnswerverifiedShow Answer

Which of the following theories states that in those industries where the output required to attain economies of scale represents a significant proportion of total world demand,the global market may be able to support only a small number of enterprises?

Correct AnswerverifiedShow Answer

Which of the following formed the crux of Porter's study of national competitive advantage?

Correct AnswerverifiedShow Answer

Vernon argues that pioneering firms in the United States kept production facilities closer to the market and centers of decision making because

Correct AnswerverifiedShow Answer

If a company were to draw from the ideas proposed in the various theories of international trade,from a profit perspective,how would it go about selecting locations for its businesses?

Correct AnswerverifiedShow Answer

Factor endowments refer to the extent to which free trade impacts the wealth of a country.

Correct AnswerverifiedShow Answer

Free trade is likely to increase a country's stock of resources and the efficiency with which it utilizes those resources.

Correct AnswerverifiedShow Answer

The new trade theory states that

Correct AnswerverifiedShow Answer

Discuss Adam Smith's concept of absolute advantage.

Correct AnswerverifiedAccording to Smith,countries should spec...View AnswerShow Answer

New Zealand is the largest exporter of dairy products to the United States.The United States is the world's third largest supplier of machinery and exports heavy machinery to New Zealand.What explains the trade equation between New Zealand and the United States?

Correct AnswerverifiedShow Answer

Mercantilism,propagated in the sixteenth and seventeenth centuries,advocated that countries should simultaneously encourage both imports and exports.

Correct AnswerverifiedShow Answer

Which of the following is an empirically supported prediction of new trade theory?

Correct AnswerverifiedShow Answer

Which of the following is in a country's best interests,according to the main tenet of mercantilism?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

One of the suggestions of new trade theory is that

Correct AnswerverifiedShow Answer

According to Adam Smith,market mechanism,rather than government policy,should determine a country's imports and exports.

Correct AnswerverifiedShow Answer

Porter argues that a nation's firms gain competitive advantage if their domestic consumers are

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
verified
According to Smith,countries should spec...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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