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Exam 5: International Trade Theories

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Question 31

Multiple Choice

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The Paul Samuelson critique looks at what happens when a rich country enters into a(n) _____ with a poor country.

A) small scale production
B) free trade agreement
C) technology transfer
D) government policy change
E) increase in employement

F) All of the above
G) B) and E)

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Question 32

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The Heckscher-Ohlin theory has a(n) _______ appeal.

A) political
B) commonsense
C) economic
D) cost efficiency
E) historical

F) C) and D)
G) A) and B)

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Question 33

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In his 1776 landmark book,The Wealth of Nations,Adam Smith supported the mercantilist assumption that trade is a zero-sum game.

_______ is/are unit cost reductions associated with a large scale of output.

Propagated in the 16^th and 17^th centuries,mercantilism advocated that countries should discourage both imports and exports.

In his study,Porter observed that there are a disproportionate number of people with finance backgrounds on the top management teams of many __________ industries.

In the first years of the expansion of NAFTA to include Mexico many companies had compelling reasons for opening a plant in Mexico.The Mexican government was enticing some businesses with incentives such as no taxes and free land.What international trade theory could justify this action? Explain.

Which of the following choices correctly matches a scholar with the theory that he or she proposed?

In terms of explaining why some countries export automobiles,consumer electronics,and machine tools,while other countries export chemicals,watches,and jewellery,David Ricardo's theory of comparative advantage offer an explanation in terms of

Globalization is described as the creation of a single world market.You can see evidence of globalization in every store,and in most products.You can also see it in the shifting of labour intensive industry to low wage cost countries.As Canadians we are generally in support of free trade.Using appropriate trade theories explain why freer trade is particularly beneficial to Canada and to our trading partners.

Who initially proposed the product life-cycle theory in the mid-1960s?

Smith's basic argument was that a country should never produce goods at home that it can buy at a lower cost from other countries.

Porter's thesis was that four broad attributes of a nation shape the environment in which local firms compete,and that these attributes promote or impede the creation of competitive advantage.All of the following is/are attributes except:

The new trade theorists argue that in those industries where the existence of substantial economies of scale imply that the world market will profitable support only a few firms,countries may export certain products simply because they have a firm that was an early entrant into that industry.

What is meant by the term "free trade? Was Adam Smith an advocate or critic of free trade? Is free trade compatible with the concept of mercantilism?

What is a possible explanation for observing the Leontief paradox?

While diamonds are mined all over the world,including in Canada,the diamond trade is centred on Antwerp Belgium in an area known as the Diamond Quarter,or the Square Mile.Diamonds are cut and polished in lower wage countries such as India (which accounts for about 90% of all diamond cutting and polishing)but they are traded in Antwerp.There are almost 4,000 dealers,brokers and financial intuitions serving this industry,all located in an area of only several blocks.Antwerp has been the centre of the diamond industry for several centuries since Lodewyk van Berken,a Flemish jeweler invented a device for polishing diamonds around the year 1450. How does the Heckscher-Ohlin theory help to explain this scenario?

Because it makes fewer simplifying assumptions,and it has been subjected to many empirical tests,most economists prefer the Heckscher-Ohlin theory to Ricardo's theory.

Porter argued that in regard to factor endowments,__________ factors are the most significant for competitive advantage in his study dealing with the competitive advantage of nations.

_______,by its choice of policies,can detract from or improve national advantage.