Question 1

Porter's theory has been subjected to detailed empirical testing and it is proven that it accurately predicts international trade patterns.

Accepted Answer

A) True 
 B)False

Question 2

Viewed from an Asian or European perspective,Vernon's argument that most new products are developed and introduced in the United States seems ethnocentric and increasingly dated.

Accepted Answer

A) True 
 B)False

Question 3

According to the theory of comparative advantage,potential world production is greater with unrestricted free trade than it is with restricted trade.

Accepted Answer

A) True 
 B)False

Question 4

Sentoria is an island nation in the Pacific ocean.It's geographical location is advantageous since it has access to a variety of aquatic life forms and also a number of fresh water sources that provide for fisheries.The lack of arable land drives local demand for seafood.The competition in the domestic fishing industry is fierce and enables Sentoria to be one of the major exporters of seafood.Which of the following theories of international trade best explains Sentoria's dominance as an exporter of seafood?

Accepted Answer

A)   New trade theory
B)   Product life-cycle theory
C)   Mercantilism
D)   Heckscher-Ohlin theory
E)   Theory of national competitive advantageF) None of the above
G) D) and E)

Question 5

Which of the following factor endowments 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) C) and E)
G) B) and C)

Question 6

Which of the following is consistent with the central beliefs of mercantilism?

Accepted Answer

A)   A country's government should intervene to achieve a surplus in the balance of trade.
B)   A large volume of trade is essential regardless of whether it comes from imports or exports.
C)   Trade is a positive-sum game in which all countries benefit from trading with each other.
D)   A country that has an absolute advantage in the production of all goods derives no benefits from international trade.
E)   Potential world production is greater with unrestricted free trade than it is with restricted trade.F) B) and E)
G) A) and C)

Question 7

Limits on imports are often in the interests of domestic consumers,but not domestic producers.

Accepted Answer

A) True 
 B)False

Question 8

Identify and briefly describe the four broad attributes that constitute Porter's diamond.

Accepted Answer

Porter theorizes that four broad attribu...

Question 9

The new trade theory diverts from its advocacy of free trade by:

Accepted Answer

A)   suggesting that price of a new product increases along with the increase in the popularity of the product.
B)   suggesting that nations benefit from trade even in absence of resource endowments and technology.
C)   suggesting an economic rationale for a proactive trade policy.
D)   stressing the role of luck, entrepreneurship, and innovation in giving a firm first-mover advantages.
E)   suggesting that market expansion leads to better realization of economies of scale.F) B) and C)
G) A) and E)

Question 10

Which of the following creates a barrier to subsequent entries in an industry dominated by first movers?

Accepted Answer

A)   The laissez-faire stance toward trade adopted by first movers
B)   Implementation of policies to maximize imports and minimize exports
C)   Specializing in the production of goods for which firms have an comparative advantage
D)   The ability of first movers to benefit from increasing returns
E)   Decrease in the variety of goods available to consumers and increase in the cost of existing goodsF) A) and E)
G) B) and C)

Question 11

The _____ theory began to emerge when economists pointed out that the ability of firms to attain economies of scale might have important implications for international trade.

Accepted Answer

A)   comparative advantage
B)   Heckscher-Ohlin
C)   new trade
D)   product life-cycle
E)   absolute advantageF) D) and E)
G) C) and E)

Question 12

Despite the short-term adjustment costs associated with adopting a free trade regime,trade would seem to produce greater economic growth and higher living standards in the long run.

Accepted Answer

A) True 
 B)False

Question 13

Free trade is likely to increase a country's stock of resources and the efficiency with which it utilizes those resources.

Accepted Answer

A) True 
 B)False

Question 14

The _____ theory states that in those industries where the output required to attain economies of scale represents a significant proportion of total world demand,the global market may be able to support only a small number of enterprises.

Accepted Answer

A)   Heckscher-Ohlin
B)   comparative advantage
C)   product life-cycle
D)   new trade
E)   absolute advantageF) C) and E)
G) A) and B)

Question 15

The theories of Smith,Ricardo,and Heckscher-Ohlin failed to identify the specific benefits of international trade.

Accepted Answer

A) True 
 B)False

Question 16

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 17

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) D) and E)
G) B) and D)

Question 18

According to the product life-cycle theory,the locus of global production initially switches from the United States to other advanced nations and then from those nations to developing countries.Which of the following is most likely to be a consequence of these trends?

Accepted Answer

A)   U.S. imports become less capital intensive than U.S. exports.
B)   The pattern of international trade get affected by differences in factor endowments rather than differences in productivity.
C)   Over time, the U.S. switches from being an exporter of a product to an importer of the product.
D)   The wage rates in the United States decrease.
E)   Developing nations fail to upgrade their skill levels to compete with advanced countries.F) A) and C)
G) D) and E)

Question 19

Meitneria and Seaboria specialize in the production of heavy machinery and textiles respectively.While Meitneria doesn't produce textiles,Seaboria is not as technologically advanced as Meitneria.In this situation,according to the Heckscher-Ohlin theory:

Accepted Answer

A)   Meitneria will import textiles from Seaboria and export heavy machinery to it.
B)   Meitneria will invest more than Seaboria in the production of textiles to exploit its comparative advantage.
C)   Meitneria and Seaboria will raise their trade barriers to protect their economies.
D)   Seaboria will recruit experts from Meitneria to specialize in the production of heavy machinery.
E)   Meitneria will recruit worksmen from Seaboria to improve its standing in the textile industry.F) B) and C)
G) A) and E)

Question 20

The argument for unrestricted free trade is that both import controls and export incentives:

Accepted Answer

A)   help firms build a competitive advantage that is subsequently difficult to challenge.
B)   help firms to capture first-mover advantages.
C)   imply that a laissez-faire stance toward trade is in the best interests of a country.
D)   are self-defeating and result in wasted resources.
E)   are not in line with principles of mercantilism.F) A) and C)
G) D) and E)

Exam 6: International Trade Theory

According to the theory of comparative advantage,potential world production is greater with unrestricted free trade than it is with restricted trade.

Correct Answer
verified

Which of the following is consistent with the central beliefs of mercantilism?

Correct Answer
verified

The _____ theory states that in those industries where the output required to attain economies of scale represents a significant proportion of total world demand,the global market may be able to support only a small number of enterprises.

Correct Answer
verified

According to the product life-cycle theory,the locus of global production initially switches from the United States to other advanced nations and then from those nations to developing countries.Which of the following is most likely to be a consequence of these trends?

Correct Answer
verified

Which of the following creates a barrier to subsequent entries in an industry dominated by first movers?

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

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

Which of the following factor endowments would be classified as a basic factor by Michael Porter?

Correct Answer
verified

The argument for unrestricted free trade is that both import controls and export incentives:

Correct Answer
verified

The theories of Smith,Ricardo,and Heckscher-Ohlin failed to identify the specific benefits of international trade.

Correct Answer
verified

Identify and briefly describe the four broad attributes that constitute Porter's diamond.

Correct Answer
verified
Porter theorizes that four broad attribu...
View Answer

Free trade is likely to increase a country's stock of resources and the efficiency with which it utilizes those resources.

Correct Answer
verified

Correct Answer
verified

Porter's theory has been subjected to detailed empirical testing and it is proven that it accurately predicts international trade patterns.

Correct Answer
verified

The new trade theory diverts from its advocacy of free trade by:

Correct Answer
verified

The _____ theory began to emerge when economists pointed out that the ability of firms to attain economies of scale might have important implications for international trade.

Correct Answer
verified

Despite the short-term adjustment costs associated with adopting a free trade regime,trade would seem to produce greater economic growth and higher living standards in the long run.

Correct Answer
verified

Limits on imports are often in the interests of domestic consumers,but not domestic producers.

Correct Answer
verified

Viewed from an Asian or European perspective,Vernon's argument that most new products are developed and introduced in the United States seems ethnocentric and increasingly dated.

Correct Answer
verified

Meitneria and Seaboria specialize in the production of heavy machinery and textiles respectively.While Meitneria doesn't produce textiles,Seaboria is not as technologically advanced as Meitneria.In this situation,according to the Heckscher-Ohlin theory:

Correct Answer
verified

Exam 6: International Trade Theory

According to the theory of comparative advantage,potential world production is greater with unrestricted free trade than it is with restricted trade.

Correct AnswerverifiedShow Answer

Which of the following is consistent with the central beliefs of mercantilism?

Correct AnswerverifiedShow Answer

The _____ theory states that in those industries where the output required to attain economies of scale represents a significant proportion of total world demand,the global market may be able to support only a small number of enterprises.

Correct AnswerverifiedShow Answer

According to the product life-cycle theory,the locus of global production initially switches from the United States to other advanced nations and then from those nations to developing countries.Which of the following is most likely to be a consequence of these trends?

Correct AnswerverifiedShow Answer

Which of the following creates a barrier to subsequent entries in an industry dominated by first movers?

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

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

Which of the following factor endowments would be classified as a basic factor by Michael Porter?

Correct AnswerverifiedShow Answer

The argument for unrestricted free trade is that both import controls and export incentives:

Correct AnswerverifiedShow Answer

The theories of Smith,Ricardo,and Heckscher-Ohlin failed to identify the specific benefits of international trade.

Correct AnswerverifiedShow Answer

Identify and briefly describe the four broad attributes that constitute Porter's diamond.

Correct AnswerverifiedPorter theorizes that four broad attribu...View AnswerShow Answer

Free trade is likely to increase a country's stock of resources and the efficiency with which it utilizes those resources.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Porter's theory has been subjected to detailed empirical testing and it is proven that it accurately predicts international trade patterns.

Correct AnswerverifiedShow Answer

The new trade theory diverts from its advocacy of free trade by:

Correct AnswerverifiedShow Answer

The _____ theory began to emerge when economists pointed out that the ability of firms to attain economies of scale might have important implications for international trade.

Correct AnswerverifiedShow Answer

Despite the short-term adjustment costs associated with adopting a free trade regime,trade would seem to produce greater economic growth and higher living standards in the long run.

Correct AnswerverifiedShow Answer

Limits on imports are often in the interests of domestic consumers,but not domestic producers.

Correct AnswerverifiedShow Answer

Viewed from an Asian or European perspective,Vernon's argument that most new products are developed and introduced in the United States seems ethnocentric and increasingly dated.

Correct AnswerverifiedShow Answer

Meitneria and Seaboria specialize in the production of heavy machinery and textiles respectively.While Meitneria doesn't produce textiles,Seaboria is not as technologically advanced as Meitneria.In this situation,according to the Heckscher-Ohlin theory:

Correct AnswerverifiedShow 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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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
verified
Porter theorizes that four broad attribu...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

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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