Question 1

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 2

Factor endowments are unit cost reductions associated with a large scale of output.

Accepted Answer

A) True 
 B)False

Question 3

Porter's theory suggests that it is in the best interest of business for a firm to invest in upgrading advanced factors of production.

Accepted Answer

A) True 
 B)False

Question 4

How does the theory of comparative advantage suggest that trade is a positive-sum game to a greater degree than the theory of absolute advantage?

Accepted Answer

The basic message of the theory of compa...

Question 5

The Nobel Prize-winning economist Paul Samuelson argued that contrary to the standard interpretation,in certain circumstances the theory of comparative advantage predicts that a rich country might actually be worse off by switching to a free trade regime with a poor nation.

Accepted Answer

A) True 
 B)False

Question 6

According to Adam Smith and David Ricardo,trade is _____.

Accepted Answer

A)   a zero-sum game
B)   a threat to a nation's sovereignty
C)   a threat to a nation's economy
D)   a positive-sum game
E)   harmful for all developed nationsF) None of the above
G) A) and E)

Question 7

Most economists prefer Ricardo's theory to the Heckscher-Ohlin theory because it makes fewer simplifying assumptions.

Accepted Answer

A) True 
 B)False

Question 8

According to Porter's diamond,what are factor endowments?

Accepted Answer

A)   The position of a nation regarding the components of production necessary to compete in a given industry
B)   The presence or absence of related industries that are internationally competitive
C)   The conditions governing how companies are created, organized, and managed and the nature of domestic rivalry
D)   The nature of home demand for the industry's product or service
E)   The economic and strategic advantages that accrue to early entrants into an industryF) All of the above
G) A) and D)

Question 9

Which of the following formed the crux of Porter's 1990 study of national competitive advantage?

Accepted Answer

A)   Identifying the various stages of the lifecycle of a product
B)   Determining how 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 existing trade theories predict international trade patterns
E)   Determining the relationship between factor endowments and economies of scaleF) A) and B)
G) C) and E)

Question 10

Briefly describe the new trade theory.

Accepted Answer

The new trade theory began to emerge in ...

Question 11

Neo-mercantilists equate political power with economic power and economic power with _____.

Accepted Answer

A)   corruption
B)   a balance-of-trade surplus
C)   regional dominance
D)   a trade monopoly
E)   capitalismF) A) and B)
G) C) and E)

Question 12

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 13

In his 1776 landmark book The Wealth of Nations,Adam Smith attacked _____ by criticizing its assumption that trade is a zero-sum game.

Accepted Answer

A)   mercantalism
B)   capitalism
C)   the new trade theory
D)   the product life-cycle theory
E)   the theory of factor endowmentsF) B) and E)
G) A) and C)

Question 14

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.
E)   threat to a nation's economy.F) A) and C)
G) B) and E)

Question 15

Vernon predicts that as the demand for a new product starts to grow in other advanced countries,in the long run,:

Accepted Answer

A)   the cost of labor in these advanced countries begins to increase.
B)   it becomes profitable for foreign firms to invest in production facilities in the United States.
C)   the firms in the United States begin to gain an absolute advantage.
D)   it begins to limit the potential for exports from the United States.
E)   the same product will begin command a higher price.F) C) and D)
G) C) and E)

Question 16

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 towards foreign products.F) A) and D)
G) B) and D)

Question 17

_____ advocated that countries should simultaneously encourage exports and discourage imports.

Accepted Answer

A)   Ethnocentrism
B)   Capitalism
C)   Collectivism
D)   Mercantilism
E)   SocialismF) C) and D)
G) A) and C)

Question 18

Which of the following is a drawback of the product life-cycle theory?

Accepted Answer

A)   Its relevance in the modern world seems limited.
B)   It makes many simplifying assumptions.
C)   It fails to explain the pattern of international trade during the period of American global dominance.
D)   It fails to explain what happens when a product's market in the United States and other advanced nations matures.
E)   It fails to account for diminishing returns.F) C) and D)
G) None of the above

Question 19

According to Michael Porter,the government can influence each of the four components of Porter's diamond-either positively or negatively.

Accepted Answer

A) True 
 B)False

Question 20

Which of the following 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) None of the above
G) D) and E)

Exam 6: International Trade Theory

In his 1776 landmark book The Wealth of Nations,Adam Smith attacked _____ by criticizing its assumption that trade is a zero-sum game.

Correct AnswerverifiedShow Answer

According to Michael Porter,the government can influence each of the four components of Porter's diamond-either positively or negatively.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Which of the following formed the crux of Porter's 1990 study of national competitive advantage?

Correct AnswerverifiedShow Answer

Porter's theory suggests that it is in the best interest of business for a firm to invest in upgrading advanced factors of production.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The Nobel Prize-winning economist Paul Samuelson argued that contrary to the standard interpretation,in certain circumstances the theory of comparative advantage predicts that a rich country might actually be worse off by switching to a free trade regime with a poor nation.

Correct AnswerverifiedShow Answer

_____ advocated that countries should simultaneously encourage exports and discourage imports.

Correct AnswerverifiedShow Answer

Most economists prefer Ricardo's theory to the Heckscher-Ohlin theory because it makes fewer simplifying assumptions.

Correct AnswerverifiedShow Answer

How does the theory of comparative advantage suggest that trade is a positive-sum game to a greater degree than the theory of absolute advantage?

Correct AnswerverifiedThe basic message of the theory of compa...View AnswerShow Answer

Which of the following is a drawback of the product life-cycle theory?

Correct AnswerverifiedShow Answer

According to Porter's diamond,what are factor endowments?

Correct AnswerverifiedShow Answer

Which of the following is true of the relationship between trade and economic growth?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Briefly describe the new trade theory.

Correct AnswerverifiedThe new trade theory began to emerge in ...View AnswerShow Answer

Factor endowments are unit cost reductions associated with a large scale of output.

Correct AnswerverifiedShow Answer

According to Adam Smith and David Ricardo,trade is _____.

Correct AnswerverifiedShow Answer

Neo-mercantilists equate political power with economic power and economic power with _____.

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

Vernon predicts that as the demand for a new product starts to grow in other advanced countries,in the long run,:

Correct AnswerverifiedShow Answer

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The basic message of the theory of compa...
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Correct Answer
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The new trade theory began to emerge in ...
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Correct Answer
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