Question 1

According to the text,most economists prefer the Heckscher-Ohlin theory to Ricardo's theory because:

Accepted Answer

A)  it makes fewer simplifying assumptions.
B)  it predicts real-world international trade patterns with greater accuracy.
C)  Ricardo's theory is less accurate due to the Leontief paradox.
D)  Ricardo's theory is too complicated to be applied to real-world scenarios.

Question 2

If a country is more efficient than any other country in the production of a product,it has what is known as relative advantage in the production of that product.

Accepted Answer

A) True 
 B)False

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)  nationalist and protective of their domestic industries.

Question 4

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.

Question 5

One of the themes in new trade theory is that the pattern of trade we observe in the world economy may be the result of _____ and _____.

Accepted Answer

A)  competitive advantage;technological advancement
B)  heterogeneous world market;globalization
C)  economies of scale;first-mover advantages
D)  liberal immigration policies;better standards of living

Question 6

According to Adam Smith,countries should specialize in the production of goods for which they have an absolute advantage and then trade these for goods produced by other countries.

Accepted Answer

A) True 
 B)False

Question 7

Which of the following statements most accurately captures the main tenet of mercantilism?

Accepted Answer

A)  It is in a country's best interests to not export products to less developed countries.
B)  It is in a country's best interests to import products even if they are most efficiently produced at home.
C)  It is in a country's best interests to import less specialized goods than to attempt to make them at home.
D)  It is in a country's best interests to maintain a trade surplus.

Question 8

What are first-mover advantages? Outline the relationship between economies of scale,first-mover advantages and the pattern of trade as indicated by new trade theory.

Accepted Answer

One of the themes in new trade theory is...

Question 9

During the 1980s,economists such as Paul Krugman developed what has come to be known as the new trade theory.

Accepted Answer

A) True 
 B)False

Question 10

Embracing a free trade regime for an advanced economy often implies that the country will produce less of some labor-intensive goods and more of some knowledge-intensive goods.

Accepted Answer

A) True 
 B)False

Question 11

According to Porter's theory of national competitive advantage,a firm should invest in upgrading advanced factors of production because it is in the best interest of business for a firm to do so.

Accepted Answer

A) True 
 B)False

Question 12

The relevance of the product life-cycle theory in the modern world seems more limited because:

Accepted Answer

A)  many countries have increasingly invested in the U.S.labor market over the past century.
B)  with the diminishing strength of the U.S.dollar,it loses the ability to generalize trade globally.
C)  it holds true only for the brief U.S.dominance of the global economy.
D)  historically,it has provided inaccurate explanations of international trade patterns.

Question 13

The ability to spread fixed costs over a large volume,and the ability of large-volume producers to utilize specialized employees and equipment that are more productive than less-specialized employees and equipment,are both sources of:

Accepted Answer

A)  first-mover disadvantages.
B)  economies of scale.
C)  conflict in international trade.
D)  rising production costs.

Question 14

How does Porter's theory predict patterns in international trade? Do his predictions hold up in a real-world scenario?

Accepted Answer

According to Porter's model of internati...

Question 15

According to the new trade theory,how does trade offer an opportunity for mutual gain even when countries do not differ in their resource endowments or technology?

Accepted Answer

A)  Trade results in a contraction of the size of the markets of individual firms.
B)  Trade allows for production of products at higher prices.
C)  Trade affords realization of scale economies.
D)  Trade allows countries to attain self-sufficiency in the production of all goods.

Question 16

In comparative advantage,the assumption is that resources can move freely from production of one good to another.Why is this assumption unrealistic?

Accepted Answer

A)  The process of shifting resources from one good to another eliminates human suffering.
B)  The benefit of free trade is much lesser compared to the cost of shifting resources.
C)  The process of moving resources causes friction and human suffering.
D)  There are regulations that prohibit such movement.

Question 17

The flaw with mercantilism was that it viewed trade as a:

Accepted Answer

A)  zero-sum game.
B)  mutually beneficial activity.
C)  positive-sum game.
D)  threat to a nation's sovereignty.

Question 18

According to the new trade theory,the dominance of America and Europe in the trade of mid-sized and large aircraft is largely a product of:

Accepted Answer

A)  the nascent world market for private jets owned by individuals.
B)  lack of technological advancement elsewhere to compete with the leaders.
C)  the unpredictability of supply and demand patterns endemic to the aviation industry.
D)  first-mover advantages afforded by the industry.

Question 19

Describe briefly the shortcomings of the product life-cycle theory.

Accepted Answer

Viewed from an Asian or European perspec...

Question 20

To an even greater degree than the theory of absolute advantage,_____ suggests that trade is a positive-sum game in which all participating countries fetch economic gains.

Accepted Answer

A)  the Heckscher-Ohlin theory
B)  mercantilism
C)  the theory of comparative advantage
D)  Leontief's paradox

Exam 5: International Trade Theory

Describe briefly the shortcomings of the product life-cycle theory.

Correct AnswerverifiedViewed from an Asian or European perspec...View AnswerShow Answer

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

Correct AnswerverifiedShow Answer

Which of the following statements most accurately captures the main tenet of mercantilism?

Correct AnswerverifiedShow Answer

According to Adam Smith,countries should specialize in the production of goods for which they have an absolute advantage and then trade these for goods produced by other countries.

Correct AnswerverifiedShow Answer

According to the new trade theory,the dominance of America and Europe in the trade of mid-sized and large aircraft is largely a product of:

Correct AnswerverifiedShow Answer

In comparative advantage,the assumption is that resources can move freely from production of one good to another.Why is this assumption unrealistic?

Correct AnswerverifiedShow Answer

One of the themes in new trade theory is that the pattern of trade we observe in the world economy may be the result of _____ and _____.

Correct AnswerverifiedShow Answer

If a country is more efficient than any other country in the production of a product,it has what is known as relative advantage in the production of that product.

Correct AnswerverifiedShow Answer

To an even greater degree than the theory of absolute advantage,_____ suggests that trade is a positive-sum game in which all participating countries fetch economic gains.

Correct AnswerverifiedShow Answer

How does Porter's theory predict patterns in international trade? Do his predictions hold up in a real-world scenario?

Correct AnswerverifiedAccording to Porter's model of internati...View AnswerShow Answer

The relevance of the product life-cycle theory in the modern world seems more limited 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

During the 1980s,economists such as Paul Krugman developed what has come to be known as the new trade theory.

Correct AnswerverifiedShow Answer

The ability to spread fixed costs over a large volume,and the ability of large-volume producers to utilize specialized employees and equipment that are more productive than less-specialized employees and equipment,are both sources of:

Correct AnswerverifiedShow Answer

According to the new trade theory,how does trade offer an opportunity for mutual gain even when countries do not differ in their resource endowments or technology?

Correct AnswerverifiedShow Answer

Embracing a free trade regime for an advanced economy often implies that the country will produce less of some labor-intensive goods and more of some knowledge-intensive goods.

Correct AnswerverifiedShow Answer

According to Porter's theory of national competitive advantage,a firm should invest in upgrading advanced factors of production because it is in the best interest of business for a firm to do so.

Correct AnswerverifiedShow Answer

What are first-mover advantages? Outline the relationship between economies of scale,first-mover advantages and the pattern of trade as indicated by new trade theory.

Correct AnswerverifiedOne of the themes in new trade theory is...View AnswerShow Answer

According to the text,most economists prefer the Heckscher-Ohlin theory to Ricardo's theory because:

Correct AnswerverifiedShow Answer

The flaw with mercantilism was that it viewed trade as a:

Correct AnswerverifiedShow Answer

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Viewed from an Asian or European perspec...
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One of the themes in new trade theory is that the pattern of trade we observe in the world economy may be the result of _ and _.

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According to Porter's model of internati...
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One of the themes in new trade theory is...
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