Question 1

Argonia and Selenia specialize in the production of medical equipment and rice respectively. Argonia exports medical equipment to Selenia, which in turn exports rice to Argonia. According to the theory of comparative advantage, this mutually beneficial trade relationship is an example of

Accepted Answer

A)   the significance of trade barriers.
B)   a positive-sum game.
C)   a first-mover advantage.
D)   the advantages of mercantilism.
E)   a zero-sum game.F) C) and E)
G) A) and E)

Question 2

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) B) and D)
G) B) and C)

Question 3

A zero-sum game occurs when

Accepted Answer

A)   the market mechanism determines what a country imports and what it exports.
B)   a country engages in international trade even for products it is able to produce for itself.
C)   an economic gain by one country results in an economic loss by another.
D)   limits on imports are done in the interests of domestic producers, but not domestic consumers.
E)   one country has an absolute advantage in the production of all goods.F) A) and D)
G) A) and C)

Question 4

Economies of scale are achieved as the result of ________ that creates unit cost reductions.

Accepted Answer

A)   trade policies
B)   increased tariffs
C)   large scale output
D)   diminishing returns
E)   absolute advantagesF) A) and E)
G) A) and D)

Question 5

Those who follow the mercantilist doctrine would not want government intervention to be the reason for a surplus in the balance of trade.

Accepted Answer

A) True 
 B)False

Question 6

Intel spreads the huge fixed costs of developing new generation chips over the nearly 2 billion chips it sells to computer makers. Intel benefits from

Accepted Answer

A)   comparative advantages.
B)   factor endowments.
C)   economies of scale.
D)   diminishing returns.
E)   absolute advantages.F) None of the above
G) A) and D)

Question 7

What is true of the relationship between trade and economic growth?

Accepted Answer

A)   Countries open to international trade display higher growth rates than those that close their economies to trade.
B)   Within a group of developing countries, closed economies grow faster than open economies.
C)   The Leontief paradox notes that adopting an open economy and embracing free trade does not reward a nation with higher economic growth.
D)   Free trade hampers economic growth and leads to lower living standards in the long run.
E)   Free trade has historically benefited poor counties and hence trade barriers should be introduced to protect rich countries from exploitation.F) A) and B)
G) A) and C)

Question 8

First-mover advantages are gained by those companies that are the early entrants to an industry.

Accepted Answer

A) True 
 B)False

Question 9

According to Vernon, what influences the movement of the locus of global production from advanced countries to developing countries?

Accepted Answer

A)   cost considerations
B)   factor endowments
C)   domestic competition
D)   supporting industries
E)   firm structureF) B) and E)
G) C) and E)

Question 10

Garrett works in a country where the government does not set quotas or duties on what its citizens can buy from another country, or what they can produce and sell to another country. In other words, Garrett's country practices

Accepted Answer

A)   free trade.
B)   mercantilism.
C)   socialism.
D)   absolute advantage.
E)   a zero-sum game.F) D) and E)
G) C) and D)

Question 11

New trade theory stresses that in some cases countries specialize in the production of particular products because of underlying differences in factor endowments.

Accepted Answer

A) True 
 B)False

Question 12

Cadmia and Rhodia specialize in the production of electronics and pharmaceutical products respectively. They are considered the best at their specializations. Cadmia trades electronics with Rhodia in exchange for pharmaceutical products. Which perspective is illustrated by this form of trade between Cadmia and Rhodia?

Accepted Answer

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

Question 13

Intricate Wiring Corp., based in Ohio, creates a brand new high-tech product. The demand for the product in the United States is high but very low or non-existent elsewhere. The company decides not to locate manufacturing facilities elsewhere and will simply meet the small foreign demand via exports. The theory that best explains the company's policy is

Accepted Answer

A)   product life cycle theory.
B)   mercantilism.
C)   the Leontief paradox.
D)   Heckscher-Ohlin theory.
E)   free trade theory.F) C) and D)
G) B) and E)

Question 14

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

Accepted Answer

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

Question 15

Garments are exported from China to the United States on a daily basis. In turn, the United States exports agricultural products like soybeans to China. Which statement best explains the trade equation between China 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) A) and B)
G) A) and E)

Question 16

New trade theory suggests that world trade in certain products will likely be dominated by countries who acted as late-movers and took advantage of existing innovations.

Accepted Answer

A) True 
 B)False

Question 17

One of the most controversial aspects of ________ is that it supports government intervention and strategic trade policy.

Accepted Answer

A)   the theory of absolute advantage
B)   the theory of comparative advantage
C)   Heckscher-Ohlin theory
D)   new trade theory
E)   product life-cycle theoryF) B) and D)
G) A) and E)

Question 18

Which factor endowment would be classified as a basic factor by Michael Porter?

Accepted Answer

A)   communication infrastructure
B)   research facilities
C)   natural resources
D)   skilled labor
E)   technological know-howF) A) and E)
G) A) and C)

Question 19

According to the theory of comparative advantage, consumers in all nations can consume more if there are

Accepted Answer

A)   stronger restrictions on trade.
B)   more monopolistic businesses.
C)   fewer incentives for intellectual property.
D)   no restrictions on trade.
E)   fewer monopolistic businesses.F) A) and B)
G) A) and C)

Question 20

The Heckscher-Ohlin theory is considered the best predictor of real-world international trade patterns.

Accepted Answer

A) True 
 B)False

Exam 6: International Trade Theory

The Heckscher-Ohlin theory is considered the best predictor of real-world international trade patterns.

Correct Answer
verified

Garrett works in a country where the government does not set quotas or duties on what its citizens can buy from another country, or what they can produce and sell to another country. In other words, Garrett's country practices

Correct Answer
verified

Economies of scale are achieved as the result of ________ that creates unit cost reductions.

Correct Answer
verified

Garments are exported from China to the United States on a daily basis. In turn, the United States exports agricultural products like soybeans to China. Which statement best explains the trade equation between China and the United States?

Correct Answer
verified

One of the most controversial aspects of ________ is that it supports government intervention and strategic trade policy.

Correct Answer
verified

First-mover advantages are gained by those companies that are the early entrants to an industry.

Correct Answer
verified

New trade theory stresses that in some cases countries specialize in the production of particular products because of underlying differences in factor endowments.

Correct Answer
verified

A zero-sum game occurs when

Correct Answer
verified

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

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

Correct Answer
verified

Correct Answer
verified

Argonia and Selenia specialize in the production of medical equipment and rice respectively. Argonia exports medical equipment to Selenia, which in turn exports rice to Argonia. According to the theory of comparative advantage, this mutually beneficial trade relationship is an example of

Correct Answer
verified

According to Vernon, what influences the movement of the locus of global production from advanced countries to developing countries?

Correct Answer
verified

Which factor endowment would be classified as a basic factor by Michael Porter?

Correct Answer
verified

Intel spreads the huge fixed costs of developing new generation chips over the nearly 2 billion chips it sells to computer makers. Intel benefits from

Correct Answer
verified

Those who follow the mercantilist doctrine would not want government intervention to be the reason for a surplus in the balance of trade.

Correct Answer
verified

What is true of the relationship between trade and economic growth?

Correct Answer
verified

According to the theory of comparative advantage, consumers in all nations can consume more if there are

Correct Answer
verified

New trade theory suggests that world trade in certain products will likely be dominated by countries who acted as late-movers and took advantage of existing innovations.

Correct Answer
verified

Exam 6: International Trade Theory

The Heckscher-Ohlin theory is considered the best predictor of real-world international trade patterns.

Correct AnswerverifiedShow Answer

Garrett works in a country where the government does not set quotas or duties on what its citizens can buy from another country, or what they can produce and sell to another country. In other words, Garrett's country practices

Correct AnswerverifiedShow Answer

Economies of scale are achieved as the result of ________ that creates unit cost reductions.

Correct AnswerverifiedShow Answer

Garments are exported from China to the United States on a daily basis. In turn, the United States exports agricultural products like soybeans to China. Which statement best explains the trade equation between China and the United States?

Correct AnswerverifiedShow Answer

One of the most controversial aspects of ________ is that it supports government intervention and strategic trade policy.

Correct AnswerverifiedShow Answer

First-mover advantages are gained by those companies that are the early entrants to an industry.

Correct AnswerverifiedShow Answer

New trade theory stresses that in some cases countries specialize in the production of particular products because of underlying differences in factor endowments.

Correct AnswerverifiedShow Answer

A zero-sum game occurs when

Correct AnswerverifiedShow Answer

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

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

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Argonia and Selenia specialize in the production of medical equipment and rice respectively. Argonia exports medical equipment to Selenia, which in turn exports rice to Argonia. According to the theory of comparative advantage, this mutually beneficial trade relationship is an example of

Correct AnswerverifiedShow Answer

According to Vernon, what influences the movement of the locus of global production from advanced countries to developing countries?

Correct AnswerverifiedShow Answer

Which factor endowment would be classified as a basic factor by Michael Porter?

Correct AnswerverifiedShow Answer

Intel spreads the huge fixed costs of developing new generation chips over the nearly 2 billion chips it sells to computer makers. Intel benefits from

Correct AnswerverifiedShow Answer

Those who follow the mercantilist doctrine would not want government intervention to be the reason for a surplus in the balance of trade.

Correct AnswerverifiedShow Answer

What is true of the relationship between trade and economic growth?

Correct AnswerverifiedShow Answer

According to the theory of comparative advantage, consumers in all nations can consume more if there are

Correct AnswerverifiedShow Answer

New trade theory suggests that world trade in certain products will likely be dominated by countries who acted as late-movers and took advantage of existing innovations.

Correct AnswerverifiedShow Answer

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