Question 1

Describe the shortcomings of the product life-cycle theory.

Accepted Answer

Viewed from an Asian or European perspec...

Question 2

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 3

Diminishing returns to specialization occurs when:

Accepted Answer

A)   resources can move freely from the production of one good to another within a country.
B)   more units of resources are required to produce each additional unit.
C)   the cost of producing goods reduces substantially with increase in number of goods produced.
D)   the quality of resources comes down as a result of producing more goods.
E)   the pain caused by the movement toward a free trade regime is a long-term phenomenon.F) A) and E)
G) D) and E)

Question 4

Porter,in his diamond model,suggested that there is a strong association between _____ and the creation and persistence of competitive advantage in an industry.

Accepted Answer

A)   trade barriers
B)   vigorous domestic rivalry
C)   purchasing power parity
D)   the availability of a captive market
E)   first-mover advantagesF) A) and E)
G) B) and C)

Question 5

Which of the following theories generates for government intervention and strategic trade policy?

Accepted Answer

A)   Theory of absolute advantage
B)   Theory of comparative advantage
C)   Heckscher-Ohlin theory
D)   New trade theory
E)   Poduct life-cycle theoryF) C) and D)
G) A) and B)

Question 6

The major advantage of mercantilism was that it viewed trade as a zero-sum game.

Accepted Answer

A) True 
 B)False

Question 7

_____ predicts that countries will export those goods that make intensive use of factors that are locally abundant,while importing goods that make intensive use of factors that are locally scarce.

Accepted Answer

A)   Mercantilism
B)   The theory of absolute advantage
C)   The Heckscher-Ohlin theory
D)   The theory of comparative advantage
E)   Samuelson's critiqueF) A) and E)
G) A) and D)

Question 8

What reasons does Raymond Vernon cite for U.S.firms basing initial production at home and not at low-cost foreign locations?

Accepted Answer

In his product life-cycle theory,Vernon ...

Question 9

On which of the following observations was Raymond Vernon's product life-cycle theory based?

Accepted Answer

A)   The wealth and size of the U.S. market gave U.S. firms a strong incentive to develop new consumer products.
B)   The high cost of U.S. labor gave U.S. firms an incentive to develop cost-saving process innovations.
C)   The United States developed a very large proportion of the world's new products for most of the twentieth century and sold them first in the U.S. market.
D)   The United States exports goods that heavily use skilled labor and imports heavy manufacturing products that use large amounts of capital.
E)   The United States has long been a substantial exporter of agricultural goods, reflecting in part its unusual abundance of arable land.F) B) and C)
G) A) and B)

Question 10

Which of the following statements best indicates Samuelson's criticism of free trade?

Accepted Answer

A)   Dynamic gains lead to a universally beneficial outcome for all countries.
B)   Offshoring service jobs that were traditionally mobile will increase the market clearing wage rate.
C)   Free trade has historically been beneficial only to third world countries.
D)   By importing cheap goods from a poor country a rich country may not be able to produce a net gain if the dynamic effect of free trade is to lower real wage rates in the rich country.
E)   Trade changes a country's stock of resources and the efficiency with which it utilizes those resources.F) B) and E)
G) C) and D)

Question 11

According to the new trade theory,trade,through its impact on economies of scale,is most likely to:

Accepted Answer

A)   reduce the volume of the goods produced.
B)   decrease the variety of goods available to consumers.
C)   decrease the average costs of goods.
D)   inhibit first-mover advantages in all industries.
E)   only benefit nations that differ in resource endowments or technology.F) A) and B)
G) D) and E)

Question 12

Raymond Vernon's product life-cycle theory was based on the observation that for most of the twentieth century a very large proportion of the world's new products were developed by the firms situated in Germany and sold first in the German market.

Accepted Answer

A) True 
 B)False

Question 13

According to the new trade theory,which of the following is most likely to be a result of market expansion due to trade?

Accepted Answer

A)   A wide variety of products is produced at greater unit costs than in the absence of trade.
B)   As the variety of products increases, demand for individual products decreases, leading to non-realization of economies of scale.
C)   Each nation may specialize in producing a narrower range of products, importing goods that it does not make.
D)   The ability to capture first-mover advantages is restricted in a world that allows trade.
E)   When countries do not differ in their resource endowments or technology, trade does not offer mutual benefits.F) D) and E)
G) C) and D)

Question 14

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) B) and C)
G) B) and E)

Question 15

Describe the Leontief paradox.

Accepted Answer

Using the Heckscher-Ohlin theory,Leontie...

Question 16

Mercantilism viewed trade as a zero-sum game.Discuss Adam Smith's and David Ricardo's stand on this view.Also discuss the phenomenon of neo-mercantilism.

Accepted Answer

Mercantilism viewed trade as a zero-sum ...

Question 17

Which of the following helps a firm to preempt available demand,gain cost advantages related to volume,and build an enduring brand ahead of later competitors?

Accepted Answer

A)   Monopolistic practices
B)   Comparative advantages
C)   Absolute advantages
D)   First-mover advantages
E)   MercantilismF) A) and B)
G) A) and C)

Question 18

The economic and strategic advantages that accrue to early entrants in an industry are called:

Accepted Answer

A)   first-mover advantages.
B)   comparative advantages.
C)   absolute advantages.
D)   economies of scale.
E)   factor endowments.F) A) and C)
G) A) and D)

Question 19

According to Vernon,which of the following factors obviates the need for pioneering U.S.firms to look for low-cost production sites in other countries?

Accepted Answer

A)   The uncertainties and risks inherent in introducing new products are very low.
B)   The demand for most new products tends to be based mainly on price.
C)   U.S. labor costs are relatively low compared to global standards.
D)   Firms can charge relatively high prices for new products.
E)   The production of innovative products in other advanced countries, limits the potential for exports from the United States.F) D) and E)
G) C) and E)

Question 20

Discuss Adam Smith's concept of absolute advantage.

Accepted Answer

According to Smith,countries should spec...

Exam 6: International Trade Theory

The economic and strategic advantages that accrue to early entrants in an industry are called:

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

Which of the following helps a firm to preempt available demand,gain cost advantages related to volume,and build an enduring brand ahead of later competitors?

Correct AnswerverifiedShow Answer

Porter,in his diamond model,suggested that there is a strong association between _____ and the creation and persistence of competitive advantage in an industry.

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

Describe the Leontief paradox.

Correct AnswerverifiedUsing the Heckscher-Ohlin theory,Leontie...View AnswerShow Answer

Which of the following statements best indicates Samuelson's criticism of free trade?

Correct AnswerverifiedShow Answer

The major advantage of mercantilism was that it viewed trade as a zero-sum game.

Correct AnswerverifiedShow Answer

According to Vernon,which of the following factors obviates the need for pioneering U.S.firms to look for low-cost production sites in other countries?

Correct AnswerverifiedShow Answer

According to the new trade theory,which of the following is most likely to be a result of market expansion due to trade?

Correct AnswerverifiedShow Answer

_____ predicts that countries will export those goods that make intensive use of factors that are locally abundant,while importing goods that make intensive use of factors that are locally scarce.

Correct AnswerverifiedShow Answer

Raymond Vernon's product life-cycle theory was based on the observation that for most of the twentieth century a very large proportion of the world's new products were developed by the firms situated in Germany and sold first in the German market.

Correct AnswerverifiedShow Answer

What reasons does Raymond Vernon cite for U.S.firms basing initial production at home and not at low-cost foreign locations?

Correct AnswerverifiedIn his product life-cycle theory,Vernon ...View AnswerShow Answer

Mercantilism viewed trade as a zero-sum game.Discuss Adam Smith's and David Ricardo's stand on this view.Also discuss the phenomenon of neo-mercantilism.

Correct AnswerverifiedMercantilism viewed trade as a zero-sum ...View AnswerShow Answer

Which of the following theories generates for government intervention and strategic trade policy?

Correct AnswerverifiedShow Answer

Describe the shortcomings of the product life-cycle theory.

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

Diminishing returns to specialization occurs when:

Correct AnswerverifiedShow Answer

On which of the following observations was Raymond Vernon's product life-cycle theory based?

Correct AnswerverifiedShow Answer

Discuss Adam Smith's concept of absolute advantage.

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

According to the new trade theory,trade,through its impact on economies of scale,is most likely to:

Correct AnswerverifiedShow Answer

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Correct Answer
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Using the Heckscher-Ohlin theory,Leontie...
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Correct Answer
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Correct Answer
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Correct Answer
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In his product life-cycle theory,Vernon ...
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Mercantilism viewed trade as a zero-sum ...
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Correct Answer
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Correct Answer
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Viewed from an Asian or European perspec...
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Correct Answer
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Correct Answer
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Correct Answer
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According to Smith,countries should spec...
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Correct Answer
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