Deck 5: Trading Internationally

Question 1

The theory of absolute advantage espouses that the economic advantage one nation enjoys is superior to another nation.

Answer 1

True

Question 2

Mercantilism, absolute advantage, and comparative advantage are examples of modern theories.

Answer 2

False

Question 3

Absolute and comparative advantages come from economic differences.

Answer 3

False

Question 4

The theory of absolute advantage was advocated by French statesman Jean Baptist Colbert.

Question 5

National competitive advantage of industries is the most recent, most complex, and most realistic among various theories.

Question 6

According to absolute advantage theory, by specializing and trading, each nation produces more and consumes more.

Question 7

Administrative policy is a superficial policy to show that exporting countries voluntarily agree to restrict their exports.

Question 8

Product life cycle theory was developed by American economist Raymond Vernon in 1966.

Question 9

Mercantilism is the direct intellectual ancestor of modern-day protectionism.

Question 10

The theory of comparative advantage states that even if a country does not have absolute advantage in production, the country can still profitably specialize if the country is relatively more efficient.

Question 11

Strategic trade is the first theory to incorporate dynamic changes in patterns of trade.

Question 12

Bureaucratic rules that make it harder to import foreign goods are defined as administrative policies.

Question 13

Based on the mercantilism theory, the wealth of all trading nations and the world increases.

Question 14

Non-tariff barriers include subsidies, import quotas, export restraints, local content requirements, administrative policies, and antidumping duties.

Question 15

Factor endowments; domestic demand; firm strategy, structure, and rivalry; and related and supporting industries are aspects of strategic trade theory.

Question 16

Adam Smith proposed the theory of comparative advantage.

Question 17

The theory of mercantilism viewed international trade as a win-win game.

Question 18

Foreign policy objectives are often sought through trade intervention.

Question 19

Factor endowment theory is a proposition that nations will develop comparative advantage based on their locally abundant factors.

Question 20

Political arguments against free trade state it does not advance a nation s political, social, and environmental agendas, regardless of possible economic gains.

Question 21

Indian innovation can reduce the price of US software exports and curtail the wage of the US IT worker.

Question 22

A policy to assist strategic advantage is known as:

A) Strategic trade policy
B) Diamond policy
C) Heckscher-Ohlin policy
D) Free trade policy

Question 23

Managers need not be politically active to appreciate the gains from trade.

Question 24

Which of the following is a classical theory?

A) Product life cycle
B) National competitive advantage
C) Strategic trade
D) Absolute advantage

Question 25

The factor endowment theory is identified as:

A) Theory that suggests that strategic intervention by governments in certain industries can enhance their odds for international success.
B) Economic theory that accounts for changes in the patterns of trade over time.
C) Proposition that nations will develop comparative advantage based on their locally abundant factors.
D) Theory that the competitive advantage of certain industries in different nations depends on four aspects that form a diamond.

Question 26

Factor endowments, which refer to the natural and human resource repertoires, were noted by:

A) Michael Porter
B) Heckscher-Ohlin
C) Adam Smith
D) Raymond Vernon

Question 27

The birth of modern economics and the forerunner of the free trade movement are strengths and influences of:

A) Absolute advantage
B) Comparative advantage
C) National competitive advantage
D) Mercantilism

Question 28

The aggregation of importing and exporting by both sides leads to a:

A) Balance of trade
B) Trade surplus or deficit
C) Different nation s trade
D) Both a balance of trade and a trade surplus or deficit

Question 29

Which of the following is a comparative advantage strength?

A) It defeats mercantilism, at least intellectually.
B) It provides direct policy advice.
C) It explains patterns of trade based on factor endowments.
D) It positively incorporates the role of governments in trade.

Question 30

American economist Raymond Vernon divided the world into:

A) Innovative nations
B) Developed nations
C) Developing nations
D) All of these answers

Question 31

The idea that governments should actively protect domestic industries from imports and vigorously promote exports represents:

A) Theory of absolute advantage
B) Theory of mercantilism
C) Protectionism
D) Modern trade theories

Question 32

Widely practiced during the 1600s and 1700s, ____ viewed international trade as a zero-sum game.

A) protectionism
B) the theory of mercantilism
C) classical trade theories
D) free trade

Question 33

The theory of absolute advantage is:

A) The idea that free market forces should determine how much to trade with little government intervention.
B) The economic advantage one nation enjoys that is absolutely superior to other nations.
C) The idea that governments should actively protect domestic industries from imports and vigorously promote exports.
D) The belief that held that the wealth of the world was fixed and that a nation that exported more and imported less would enjoy the net inflows of gold and silver and thus become richer.

Question 34

An economic theory that accounts for changes in the patterns of trade over time is known as:

A) Strategic trade theory
B) First-mover advantage theory
C) Product life cycle theory
D) Strategic trade policy

Question 35

Managers should monitor and nurture current comparative advantages of certain locations and take advantage of new locations.

Question 36

The United States runs the world s largest trade deficit.

Question 37

Which of the following is the first theory to incorporate dynamic changes in patterns of trade?

A) Strategic trade
B) Mercantilism
C) Product life cycle
D) Absolute advantage

Question 38

The relative advantage in one economic activity that one nation enjoys in comparison with other nations is known as:

A) Theory of comparative advantage
B) Theory of absolute advantage
C) Free-trade advantage
D) Theory of nations advantage

Question 39

The national competitive advantage of industries depends on:

A) Country factor endowments and firm strategy, structure, and rivalry
B) Domestic demand conditions
C) Related and supporting industries
D) All of these answers

Question 40

Although American movies dominate the world market, ____ limit the market share of American movies to protect their domestic movies.

A) Canada
B) France
C) South Korea
D) All of these answers

Question 41

Discuss the political arguments against free trade.

Question 42

Discuss the national competitive advantage of industries.

Question 43

What determines the success and failure of a firm s exports around the globe?

Question 44

Political arguments against free trade include:

A) National security and consumer perception
B) Foreign policy and environmental and social responsibility
C) Foreign policy and national security
D) National security, consumer perception, foreign policy, and environmental and social responsibility

Question 45

A policy developed to show that exporting countries voluntarily agree to restrict their exports is known as:

A) Voluntary export restraints
B) Local content requirements
C) Administrative policy
D) Antidumping duties

Question 46

Identify the strengths and influences of the classical theories of international trade.

Question 47

As a major tariff barrier, a(n) ____ is a tax imposed on imports.

A) Import tariff
B) Export tariff
C) Deadweight costs
D) NTBs

Question 48

Compare and contrast absolute advantage and comparative advantage trade theories.

Question 49

Define three non-tariff barriers and explain their implications.

Question 50

What determines the success and failure of a firm s exports around the globe?

A) Discovering and leveraging the comparative advantage of world-class locations.
B) Monitoring and nurturing the current comparative advantage of certain locations combined with taking advantage of new locations.
C) Being politically active to demonstrate, safeguard, and advance the gains from international trade.
D) All of these answers.

Question 51

Discuss the characteristics of the modern theories of international trade.

Question 52

____ are restrictions on the quantity of goods brought into a country.

A) Export restraints
B) Import quotas
C) Local content requirements
D) Antidumping duties

Question 53

NTBs include:

A) Subsidies, import quotas
B) Export restraints, local content requirements
C) Administrative policies, antidumping duties
D) All of these answers