Question 1

Companies that trade small volumes of product can benefit from economies of scale.

Accepted Answer

A) True 
 B)False

Question 2

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) A) and C)

Question 3

What is the main principle of mercantilism?

Accepted Answer

The main tenet of mercantilism is that i...

Question 4

Some of the arguments made by the product life-cycle theory seem ethnocentric and increasingly dated when viewed from an Asian or European perspective.

Accepted Answer

A) True 
 B)False

Question 5

Identify the theory that supports the view that in some cases countries export for the reason that the world market can support only a limited number of firms.

Accepted Answer

A)   Heckscher-Ohlin theory
B)   Smith's theory
C)   Ricardo's theory
D)   New trade theoryE) None of the above
F) B) and C)

Question 6

Diminishing returns to specialization occurs when ____.

Accepted Answer

A)   each additional unit is produced with lesser number of laborers
B)   a nation's gross domestic product declines for a few years
C)   production possibility frontier appears as a rectangle
D)   more units of resources are required to produce each additional unitE) A) and B)
F) A) and C)

Question 7

According to Ricardo's theory of comparative advantage, countries shall not produce a good even if they have an absolute advantage in its production.

Accepted Answer

A) True 
 B)False

Question 8

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) C) and D)
F) B) and C)

Question 9

What are the sources of economies of scale?

Accepted Answer

Economies of scale are unit cost reducti...

Question 10

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 11

A rich country improves its productivity by engaging in free trade with a poor country. This situation supports Paul Samuelson's critique.

Accepted Answer

A) True 
 B)False

Question 12

Variety of goods that a country can produce is limited by the size of the market in industries where economies of scale are important.

Accepted Answer

A) True 
 B)False

Question 13

Which of the following is one of the four attributes present in Porter's diamond?

Accepted Answer

A)   Economies of scale
B)   Factor endowments
C)   Structural innovation
D)   Procedural innovationE) None of the above
F) All of the above

Question 14

Identify the theory that predicts that countries will export those goods that make intensive use of factors that are locally abundant.

Accepted Answer

A)   Theory of comparative advantage
B)   Ricardo theory
C)   New trade theory
D)   Heckscher-Ohlin theoryE) A) and D)
F) B) and D)

Question 15

Simple model of free trade assumed away transportation costs between countries.

Accepted Answer

A) True 
 B)False

Question 16

Which of the following is a major benefit of engaging in free trade?

Accepted Answer

A)   It helps to reduce the financial volatility in global markets.
B)   It helps the countries protect the jobs that are available to their citizens.
C)   It gives countries access to products that they cannot produce.
D)   It allows the governments to exert more control on businesses.E) A) and B)
F) C) and D)

Question 17

Explain the Paul Samuelson's critique.

Accepted Answer

Paul Samuelson's critique looks at what ...

Question 18

Which of the following terms refers to the unit cost reductions associated with large sized outputs?

Accepted Answer

A)   Absolute advantage of production
B)   Economies of scale
C)   Constant marginal returns
D)   Diminishing marginal returnsE) B) and D)
F) A) and B)

Question 19

The Heckscher-Ohlin theory predicts that countries will export those goods that make intensive use of factors that are locally scarce.

Accepted Answer

A) True 
 B)False

Question 20

Explain the concept of free trade.

Accepted Answer

Free trade refers to a situation where a...

Exam 6: International Trade Theory

What is the main principle of mercantilism?

Correct AnswerverifiedThe main tenet of mercantilism is that i...View AnswerShow Answer

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

Correct AnswerverifiedShow Answer

Which of the following is one of the four attributes present in Porter's diamond?

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

Simple model of free trade assumed away transportation costs between countries.

Correct AnswerverifiedShow Answer

Identify the theory that predicts that countries will export those goods that make intensive use of factors that are locally abundant.

Correct AnswerverifiedShow Answer

Companies that trade small volumes of product can benefit from economies of scale.

Correct AnswerverifiedShow Answer

Which of the following terms refers to the unit cost reductions associated with large sized outputs?

Correct AnswerverifiedShow Answer

Variety of goods that a country can produce is limited by the size of the market in industries where economies of scale are important.

Correct AnswerverifiedShow Answer

What are the sources of economies of scale?

Correct AnswerverifiedEconomies of scale are unit cost reducti...View AnswerShow Answer

Explain the Paul Samuelson's critique.

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

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

Correct AnswerverifiedShow Answer

Identify the theory that supports the view that in some cases countries export for the reason that the world market can support only a limited number of firms.

Correct AnswerverifiedShow Answer

The Heckscher-Ohlin theory predicts that countries will export those goods that make intensive use of factors that are locally scarce.

Correct AnswerverifiedShow Answer

Some of the arguments made by the product life-cycle theory seem ethnocentric and increasingly dated when viewed from an Asian or European perspective.

Correct AnswerverifiedShow Answer

A rich country improves its productivity by engaging in free trade with a poor country. This situation supports Paul Samuelson's critique.

Correct AnswerverifiedShow Answer

According to Ricardo's theory of comparative advantage, countries shall not produce a good even if they have an absolute advantage in its production.

Correct AnswerverifiedShow Answer

Explain the concept of free trade.

Correct AnswerverifiedFree trade refers to a situation where a...View AnswerShow Answer

Diminishing returns to specialization occurs when ____.

Correct AnswerverifiedShow Answer

Which of the following is a major benefit of engaging in free trade?

Correct AnswerverifiedShow Answer

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The main tenet of mercantilism is that i...
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Correct Answer
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Economies of scale are unit cost reducti...
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Correct Answer
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Paul Samuelson's critique looks at what ...
View Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Free trade refers to a situation where a...
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Correct Answer
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Correct Answer
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