Question 1

________ 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)   New trade theory
B)   Absolute advantage
C)   The world market theory
D)   MercantilismE) A) and C)
F) C) and D)

Question 2

Factor endowments refer to the extent to which a country is gifted with such resources as land, labor, and capital.

Accepted Answer

A) True 
 B)False

Question 3

Which of the following 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)   economic patriotism
B)   protectionism
C)   free trade
D)   offshoringE) None of the above
F) A) and B)

Question 4

________ 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)   MercantilismE) A) and B)
F) All of the above

Question 5

Which of the following is a major disadvantage of the product life-cycle theory introduced by Vernon?

Accepted Answer

A)   The theory's arguments seem ethnocentric and increasingly dated.
B)   The theory failed to explain the dominance of developed nations.
C)   The theory applies only when a poor nation invents a new product.
D)   The theory cannot be used to explain the production of luxury products.E) A) and B)
F) None of the above

Question 6

The variety of goods that a country can produce is limited by the size of the market in industries where ________ are important.

Accepted Answer

A)   factor endowments
B)   current account deficits
C)   economies of scale
D)   current account surplusesE) None of the above
F) A) and B)

Question 7

If foreigners suddenly reduced their investments in the United States, what would happen?

Accepted Answer

A)   The value of the dollar on foreign exchange markets would increase.
B)   The action would have no impact on the U.S. economy.
C)   The foreigners would sell U.S. dollars for another currency.
D)   The price of U.S. exports would increase.E) None of the above
F) B) and C)

Question 8

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 9

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

Accepted Answer

A)   first-mover advantage.
B)   constant marginal returns.
C)   economies of scale.
D)   absolute advantage of production.E) All of the above
F) A) and D)

Question 10

Explain Paul Samuelson's critique.

Accepted Answer

Paul Samuelson's critique looks at what ...

Question 11

XYZ Toys manufactures and sells small quantities of each of its products, but it can still benefit from economies of scale.

Accepted Answer

A) True 
 B)False

Question 12

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 explain nations' dominance in 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.E) C) and D)
F) A) and B)

Question 13

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 an abundant supply of unskilled workers.
D)   their domestic consumers are demanding.E) None of the above
F) A) and B)

Question 14

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 worldwide.E) B) and C)
F) A) and B)

Question 15

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.E) A) and B)
F) B) and C)

Question 16

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

Accepted Answer

A)   communication infrastructure
B)   skilled labor
C)   natural resources
D)   technological knowledgeE) A) and D)
F) B) and D)

Question 17

A country has an absolute advantage in the production of a product when it

Accepted Answer

A)   has the capability to produce the product within its boundaries.
B)   is more efficient than any other country in producing it.
C)   has the largest domestic demand for the product.
D)   has access to the raw materials needed to produce the product.E) A) and C)
F) A) and D)

Question 18

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.E) B) and C)
F) A) and D)

Question 19

A country has an absolute advantage in the production of a product when it is more efficient than any other country in producing it.

Accepted Answer

A) True 
 B)False

Question 20

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

Accepted Answer

A) True 
 B)False

Exam 6: International Trade Theory

Which of the following is a major disadvantage of the product life-cycle theory introduced by Vernon?

Correct AnswerverifiedShow Answer

A country has an absolute advantage in the production of a product when it

Correct AnswerverifiedShow Answer

Which of the following refers to a situation where a government does not attempt to influence through quotas or duties what its citizens can buy from another country?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

________ 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.

Correct AnswerverifiedShow Answer

Explain Paul Samuelson's critique.

Correct AnswerverifiedPaul Samuelson's critique looks at what ...View AnswerShow Answer

Factor endowments refer to the extent to which a country is gifted with such resources as land, labor, and capital.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

If foreigners suddenly reduced their investments in the United States, what would happen?

Correct AnswerverifiedShow Answer

XYZ Toys manufactures and sells small quantities of each of its products, but it can still benefit from economies of scale.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The Heckscher-Ohlin theory predicts that countries will

Correct AnswerverifiedShow Answer

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

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

Correct AnswerverifiedShow Answer

A country has an absolute advantage in the production of a product when it is more efficient than any other country in producing it.

Correct AnswerverifiedShow Answer

The variety of goods that a country can produce is limited by the size of the market in industries where ________ are important.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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Paul Samuelson's critique looks at what ...
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