Question 1

India specializes in business process outsourcing and does this more efficiently than any other country. It buys agricultural commodities, which it produces less efficiently than outsourcing activities, from the United States, even though it produces these agricultural commodities more efficiently than the United States Which international trade theory supports India's decision to buy agricultural commodities from the United States?

Accepted Answer

A)   Samuelson critique
B)   mercantilism
C)   Ricardo's theory of comparative advantage
D)   Adam Smith's theory of absolute advantage
E)   Leontief's paradoxF) None of the above
G) C) and E)

Question 2

One of the suggestions of new trade theory is that

Accepted Answer

A)   differences in technology leads to differences in productivity, which in turn, drives international trade patterns.
B)   nations may benefit from trade irrespective of resource endowments or technology.
C)   the demand for most new products tends to be based on nonprice factors.
D)   globally dispersed production reduces the production costs of mature products.
E)   comparative advantage does not arrive from a difference in factor endowments but from a difference in productivity.F) A) and B)
G) All of the above

Question 3

Discuss the policy implications of Porter's theory of national competitive advantage.

Accepted Answer

Porter's theory of national competitive ...

Question 4

Why do diminishing rather than constant returns to specialization sometimes occur?

Accepted Answer

A)   All resources are of the same quality.
B)   Resources can shift from the production of one good to another seamlessly.
C)   Each country has a fixed stock of resources.
D)   Different goods use different resources in different proportions.
E)   Trade does not affect the distribution of income within a country.F) A) and D)
G) A) and E)

Question 5

Airbus pioneered the development of the new superjumbo jet at a cost of $15 billion. It quickly obtained contracts for much of the 400 units that are expected to be ordered in the next 20 years, thereby effectively shutting out its competitor, Boeing. Airbus benefits from

Accepted Answer

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

Question 6

One of the rebuttals to Samuelson's critique of the free trade model is that

Accepted Answer

A)   the United States' ability to achieve constant returns to specialization is unparalleled.
B)   the strict immigration policies of the United States help insulate the economy from inward migration.
C)   introducing trade barriers may in fact be beneficial to developed nations to some extent.
D)   developing nations are unlikely to upgrade the skill level of their workforce rapidly enough.
E)   the developing nations are unlikely to run into diminishing returns in a near future.F) B) and E)
G) A) and C)

Question 7

Explain Porter's approach to factors of production.

Accepted Answer

Factor endowments lie at the center of t...

Question 8

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 to command a higher price.F) A) and B)
G) A) and C)

Question 9

Based on the last quarterly report, Jason realizes that it is now taking more resources to produce each of the laptop computers his company makes. What aspect of comparative advantage is Jason noticing?

Accepted Answer

A)   increasing tariffs
B)   diminishing returns
C)   JIT inventory
D)   economies of scale
E)   constant returnsF) B) and E)
G) All of the above

Question 10

Adam Smith disagreed with the mercantilist assumption because he believed that countries differ in their ability to produce goods efficiently.

Accepted Answer

A) True 
 B)False

Question 11

The new trade theory is at variance with which theory, which suggests that a country will predominate in the export of a product when it is particularly well endowed with those factors used intensively in its manufacture?

Accepted Answer

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

Question 12

Michael Porter argues that advanced factors are the most significant for competitive advantage.

Accepted Answer

A) True 
 B)False

Question 13

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 14

Which of the following theories 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) A) and D)
G) All of the above

Question 15

Which strategy is in a country's best interests, according to the main tenet of mercantilism?

Accepted Answer

A)   importing products from developing rather than developed countries
B)   importing products even if they are efficiently produced at home
C)   importing less specialized goods rather than attempting to make them at home
D)   minimizing exports and maximizing imports
E)   maintaining a trade surplusF) C) and E)
G) All of the above

Question 16

Raymond Vernon's product life cycle theory stemmed from the idea that for most of the twentieth century,

Accepted Answer

A)   European industries guided the rest of the world in new products.
B)   cost-saving processes were not as important as the development of new products.
C)   many of the world's new products were developed and first sold in the United States.
D)   most new products were developed for the manufacturing and agricultural industries.
E)   the United States had lower technology-driven innovations than other developed nations.F) C) and E)
G) B) and E)

Question 17

Which theory 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)   theory of absolute advantage
C)   Heckscher-Ohlin theory
D)   theory of comparative advantage
E)   Samuelson's critiqueF) None of the above
G) B) and E)

Question 18

Describe the concept of comparative advantage and provide an example.

Accepted Answer

The basic message of the theory of compa...

Question 19

According to new trade theory, what 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) C) and D)
G) B) and D)

Question 20

U.S. exports are less capital-intensive than U.S. imports, despite the relative abundance of capital in the country. This is in opposition to the Heckscher-Ohlin theory and has been labelled

Accepted Answer

A)   a zero-sum game.
B)   Leontief's paradox.
C)   a positive-sum game.
D)   Samuelson's critique.
E)   a first-mover advantage.F) All of the above
G) D) and E)

Exam 6: International Trade Theory

Why do diminishing rather than constant returns to specialization sometimes occur?

Correct Answer
verified

The new trade theory is at variance with which theory, which suggests that a country will predominate in the export of a product when it is particularly well endowed with those factors used intensively in its manufacture?

Correct Answer
verified

U.S. exports are less capital-intensive than U.S. imports, despite the relative abundance of capital in the country. This is in opposition to the Heckscher-Ohlin theory and has been labelled

Correct Answer
verified

Airbus pioneered the development of the new superjumbo jet at a cost of $15 billion. It quickly obtained contracts for much of the 400 units that are expected to be ordered in the next 20 years, thereby effectively shutting out its competitor, Boeing. Airbus benefits from

Correct Answer
verified

Which strategy is in a country's best interests, according to the main tenet of mercantilism?

Correct Answer
verified

Which of the following theories 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

One of the rebuttals to Samuelson's critique of the free trade model is that

Correct Answer
verified

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

Correct Answer
verified

Michael Porter argues that advanced factors are the most significant for competitive advantage.

Correct Answer
verified

Adam Smith disagreed with the mercantilist assumption because he believed that countries differ in their ability to produce goods efficiently.

Correct Answer
verified

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

Correct Answer
verified

Explain Porter's approach to factors of production.

Correct Answer
verified
Factor endowments lie at the center of t...
View Answer

Based on the last quarterly report, Jason realizes that it is now taking more resources to produce each of the laptop computers his company makes. What aspect of comparative advantage is Jason noticing?

Correct Answer
verified

Describe the concept of comparative advantage and provide an example.

Correct Answer
verified
The basic message of the theory of compa...
View Answer

Correct Answer
verified

Which theory 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 Answer
verified

Discuss the policy implications of Porter's theory of national competitive advantage.

Correct Answer
verified
Porter's theory of national competitive ...
View Answer

Raymond Vernon's product life cycle theory stemmed from the idea that for most of the twentieth century,

Correct Answer
verified

One of the suggestions of new trade theory is that

Correct Answer
verified

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

Exam 6: International Trade Theory

Why do diminishing rather than constant returns to specialization sometimes occur?

Correct AnswerverifiedShow Answer

The new trade theory is at variance with which theory, which suggests that a country will predominate in the export of a product when it is particularly well endowed with those factors used intensively in its manufacture?

Correct AnswerverifiedShow Answer

U.S. exports are less capital-intensive than U.S. imports, despite the relative abundance of capital in the country. This is in opposition to the Heckscher-Ohlin theory and has been labelled

Correct AnswerverifiedShow Answer

Airbus pioneered the development of the new superjumbo jet at a cost of $15 billion. It quickly obtained contracts for much of the 400 units that are expected to be ordered in the next 20 years, thereby effectively shutting out its competitor, Boeing. Airbus benefits from

Correct AnswerverifiedShow Answer

Which strategy is in a country's best interests, according to the main tenet of mercantilism?

Correct AnswerverifiedShow Answer

Which of the following theories 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

One of the rebuttals to Samuelson's critique of the free trade model is that

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

Michael Porter argues that advanced factors are the most significant for competitive advantage.

Correct AnswerverifiedShow Answer

Adam Smith disagreed with the mercantilist assumption because he believed that countries differ in their ability to produce goods efficiently.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Explain Porter's approach to factors of production.

Correct AnswerverifiedFactor endowments lie at the center of t...View AnswerShow Answer

Based on the last quarterly report, Jason realizes that it is now taking more resources to produce each of the laptop computers his company makes. What aspect of comparative advantage is Jason noticing?

Correct AnswerverifiedShow Answer

Describe the concept of comparative advantage and provide an example.

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

Correct AnswerverifiedShow Answer

Which theory 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

Discuss the policy implications of Porter's theory of national competitive advantage.

Correct AnswerverifiedPorter's theory of national competitive ...View AnswerShow Answer

Raymond Vernon's product life cycle theory stemmed from the idea that for most of the twentieth century,

Correct AnswerverifiedShow Answer

One of the suggestions of new trade theory is that

Correct AnswerverifiedShow Answer

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

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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Correct Answer
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Correct Answer
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Correct Answer
verified
Factor endowments lie at the center of t...
View Answer

Correct Answer
verified

Correct Answer
verified
The basic message of the theory of compa...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
Porter's theory of national competitive ...
View Answer

Correct Answer
verified

Correct Answer
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Correct Answer
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