Question 1

Which of the following is a correct inference from Adam Smith's theory of absolute advantage?

Accepted Answer

A)   There is no virtue in a large volume of trade. Rather, policies should be implemented to maximize exports and minimize imports.
B)   It is in a country's best interests to maintain a trade surplus, to export more than it imports.
C)   Trade is a zero-sum game in which a gain by one country results in a loss by another.
D)   A country that has an absolute advantage in the production of all goods might derive no benefits from international trade.
E)   Trade is a positive-sum game in which all countries that participate realize economic gains.F) A) and E)
G) D) and E)

Question 2

One of the key assumptions of the Heckscher-Ohlin theory is that:

Accepted Answer

A)   technologies are the same across countries.
B)   the prices of resources in different countries are similar.
C)   resources can move freely from the production of one good to another within a country.
D)   trade has no effect on income distribution in a country.
E)   trade patterns are largely driven by international differences in productivity.F) A) and E)
G) All of the above

Question 3

The difference between Ricardo's theory and the Heckscher-Ohlin theory is that the Heckscher-Ohlin theory:

Accepted Answer

A)   makes more simplifying assumptions.
B)   cannot be subjected to empirical tests.
C)   actually predicts trade patterns with greater accuracy.
D)   argues that the pattern of international trade is determined by differences in national factor endowments.
E)   suggests that trade is a positive-sum game in which all countries that participate realize economic gains.F) C) and D)
G) A) and D)

Question 4

Which of the following is true of factor endowments according to Porter?

Accepted Answer

A)   Basic factors, unlike advanced factors, are the most significant for competitive advantage.
B)   Basic factors can be upgraded by nations, while advanced factors are endowed by nature.
C)   The initial advantage provided by advanced factors is extended by investment in basic factors.
D)   Disadvantage in basic factors can create pressures to invest in advanced factors.
E)   Advanced factors include climate, location, and demographics.F) D) and E)
G) All of the above D

Question 5

A certain amount of friction is involved when resources are required to move from one economic activity to another.

Accepted Answer

A) True 
 B)False

Question 6

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

Accepted Answer

Porter's theory of national competitive ...

Question 7

Who is the proponent of the theory of comparative advantage?

Accepted Answer

A)   Adam Smith
B)   David Ricardo
C)   Paul Samuelson
D)   Eli Heckscher
E)   Bertil OhlinF) B) and E)
G) A) and B)

Question 8

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

Accepted Answer

A)   Comparative advantages
B)   Factor endowments
C)   Economies of scale
D)   Diminishing returns
E)   Absolute advantagesF) A) and B)
G) D) and E)

Question 9

According to the Heckscher-Ohlin theory,the pattern of international trade is determined by differences in _____.

Accepted Answer

A)   labor productivity
B)   diminishing returns
C)   factor endowments
D)   management practices
E)   trade barriersF) A) and B)
G) A) and C)

Question 10

_____ suggests that consumers in all nations can consume more if there are no restrictions on trade.

Accepted Answer

A)   The Heckscher-Ohlin theory
B)   Mercantilism
C)   Leontief's paradox
D)   Ricardo's theory of comparative advantage
E)   The Samuelson critiqueF) D) and E)
G) A) and E)

Question 11

One of the suggestions of the 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) None of the above
G) B) and E)

Question 12

According to the product life-cycle theory,the locus of global production initially switches from developing countries to other advanced nations and then from those nations to the United States .

Accepted Answer

A) True 
 B)False

Question 13

Which of the following is true of the four attributes that make Porter's diamond?

Accepted Answer

A)   Absence of any single attribute does not impact effectiveness of the diamond.
B)   The effect of one attribute is contingent on the state of others.
C)   The diamond is not a mutually reinforcing system.
D)   Chance events, such as major innovations, do not affect Porter's diamond.
E)   Only in the absence of one of the four attributes, government policies can influence Porter's diamond.F) C) and E)
G) B) and D)

Question 14

Which of the following 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) B) and C)
G) B) and D)

Question 15

Which of the following is a reason for diminishing rather than constant returns to specialization?

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 B)
G) A) and C)

Question 16

The Republic of Argonia,owing to it's vast resources of arable land and fresh water,is an agrarian nation.It exports agricultural products and in turn imports products that it does not produce such as oil,machinery,computers,and electronic devices.The result is that it spends more on imports than what it gains from exports.Which of the following theories prohibits such international trade?

Accepted Answer

A)   New trade theory
B)   Product life-cycle theory
C)   Mercantilism
D)   Heckscher-Ohlin theory
E)   Theory of national competitive advantageF) D) and E)
G) A) and D)

Question 17

The first theory of international trade that emerged in England asserted that gold and silver were the mainstays of national wealth and essential to vigorous commerce.

Accepted Answer

A) True 
 B)False

Question 18

Briefly explain how demand conditions shape the environment in which local firms compete.

Accepted Answer

Porter emphasizes the role home demand plays in upgrading competitive advantage.Firms are typically most sensitive to the needs of their closest customers.Thus,the characteristics of home demand are particularly important in shaping the attributes of domestically made products and in creating pressures for innovation and quality.Porter argues that a nation's firms gain competitive advantage if their domestic consumers are sophisticated and demanding.Such consumers pressure local firms to meet high standards of product quality and to produce innovative products.

Question 19

According to Ricardo's theory of comparative advantage,it makes sense for a country to specialize in the production of those goods that it produces most efficiently and to import goods that it produces less efficiently.

Accepted Answer

A) True 
 B)False  True

Question 20

Which of the following was being determined by the research that led to the development of the theory of national competitive advantage?

Accepted Answer

A)   How government intervention and trade policies affect international trade
B)   How economies of scale impact the variety of goods and scale of production
C)   How technological advances impact first mover advantages
D)   Why some countries succeed and others fail in international competition
E)   How trade increases the variety of goods and decrease the cost of these goodsF) B) and C)
G) D) and E)

Exam 6: International Trade Theory

Which of the following is a correct inference from Adam Smith's theory of absolute advantage?

Correct Answer
verified

One of the key assumptions of the Heckscher-Ohlin theory is that:

Correct Answer
verified

The difference between Ricardo's theory and the Heckscher-Ohlin theory is that the Heckscher-Ohlin theory:

Correct Answer
verified

Which of the following is true of factor endowments according to Porter?

Correct Answer
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D

A certain amount of friction is involved when resources are required to move from one economic activity to another.

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

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

Who is the proponent of the theory of comparative advantage?

Correct Answer
verified

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

Correct Answer
verified

According to the Heckscher-Ohlin theory,the pattern of international trade is determined by differences in _____.

Correct Answer
verified

_____ suggests that consumers in all nations can consume more if there are no restrictions on trade.

Correct Answer
verified

One of the suggestions of the new trade theory is that:

Correct Answer
verified

According to the product life-cycle theory,the locus of global production initially switches from developing countries to other advanced nations and then from those nations to the United States .

Correct Answer
verified

Which of the following is true of the four attributes that make Porter's diamond?

Correct Answer
verified

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

Correct Answer
verified

Which of the following is a reason for diminishing rather than constant returns to specialization?

Correct Answer
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Correct Answer
verified

The first theory of international trade that emerged in England asserted that gold and silver were the mainstays of national wealth and essential to vigorous commerce.

Correct Answer
verified

Briefly explain how demand conditions shape the environment in which local firms compete.

According to Ricardo's theory of comparative advantage,it makes sense for a country to specialize in the production of those goods that it produces most efficiently and to import goods that it produces less efficiently.

Correct Answer
verified
True

Which of the following was being determined by the research that led to the development of the theory of national competitive advantage?

Correct Answer
verified

Exam 6: International Trade Theory

Which of the following is a correct inference from Adam Smith's theory of absolute advantage?

Correct AnswerverifiedShow Answer

One of the key assumptions of the Heckscher-Ohlin theory is that:

Correct AnswerverifiedShow Answer

The difference between Ricardo's theory and the Heckscher-Ohlin theory is that the Heckscher-Ohlin theory:

Correct AnswerverifiedShow Answer

Which of the following is true of factor endowments according to Porter?

Correct AnswerverifiedD

A certain amount of friction is involved when resources are required to move from one economic activity to another.

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

Who is the proponent of the theory of comparative advantage?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

According to the Heckscher-Ohlin theory,the pattern of international trade is determined by differences in _____.

Correct AnswerverifiedShow Answer

_____ suggests that consumers in all nations can consume more if there are no restrictions on trade.

Correct AnswerverifiedShow Answer

One of the suggestions of the new trade theory is that:

Correct AnswerverifiedShow Answer

According to the product life-cycle theory,the locus of global production initially switches from developing countries to other advanced nations and then from those nations to the United States .

Correct AnswerverifiedShow Answer

Which of the following is true of the four attributes that make Porter's diamond?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Which of the following is a reason for diminishing rather than constant returns to specialization?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The first theory of international trade that emerged in England asserted that gold and silver were the mainstays of national wealth and essential to vigorous commerce.

Correct AnswerverifiedShow Answer

Briefly explain how demand conditions shape the environment in which local firms compete.

According to Ricardo's theory of comparative advantage,it makes sense for a country to specialize in the production of those goods that it produces most efficiently and to import goods that it produces less efficiently.

Correct AnswerverifiedTrue

Which of the following was being determined by the research that led to the development of the theory of national competitive advantage?

Correct AnswerverifiedShow Answer

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D

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

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True

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