Deck 3: The Theory of Trade and Investment

Question 1

___________ is the political and economic policy aimed at increasing a nation's wealth and power by encouraging the export of goods in return for gold.

A)Democracy
B)Autarky
C)Absolute advantage
D)Monopoly
E)Mercantilism

Answer 1

E

Question 2

According to the ____________,each country should specialize in the production and export of that good which it produces most efficiently,with the fewest labor hours.

A)theory of comparative advantage
B)theory of absolute advantage
C)theory of factor proportions
D)Leontief Paradox
E)product cycle theory

Answer 2

B

Question 3

The countries of Honduras and Belize engage in trade of bananas and sugar cane. Although Honduras has an absolute advantage in the production of both bananas and sugar cane,it is relatively more efficient in the production of bananas. Therefore,Honduras exports bananas to Belize and imports sugar cane from Belize. This example demonstrates the:

A)Product cycle theory
B)Theory of absolute advantage
C)Theory of factor proportions
D)Leontief Paradox
E)Theory of comparative advantage

Answer 3

E

Question 4

__________ theory views products as passing through four stages: introduction,growth,maturity,and decline.

A)Absolute advantage
B)Competitive advantage of nations
C)Factor proportions
D)Overlapping product ranges
E)Product cycle

Question 5

A(n)______________ represents the total productive capabilities of a nation and is used in the formulation of classical and modern trade theory.

A)trade comparison chart
B)trade theory diagram
C)supply and demand curve
D)production possibility frontier
E)advantage matrix

Question 6

Even if one country was most efficient in the production of two products,it must be relatively more efficient in the production of one good. It should then specialize in the production and export of that good in exchange for the importation of the other goods. This describes the:

A)Theory of comparative advantage
B)Theory of absolute advantage
C)Theory of factor proportions
D)Leontief Paradox
E)Product cycle theory

Question 7

The overlapping product ranges described by Linder would today be called:

A)Marketing strategies
B)Production frontiers
C)Market segments
D)Product segments
E)Product targets

Question 8

As per-capita income in China rises,the complexity and quality level of the products demanded by Chinese consumers also rises. This is a principle of which theory?

A)Theory of absolute advantage
B)Overlapping product ranges theory
C)Competitive advantage of nations theory
D)Imperfect markets theory
E)Product cycle theory

Question 9

___________ refers to self sufficiency during feudal times.

A)Oligarchy
B)Monarchy
C)Autarky
D)Monopoly
E)Mercantilism

Question 10

___________ refers to the returns foregone on any resource or asset from using it in its next best use.

A)Alternative cost
B)Trade cost
C)Capital risk
D)Opportunity cost
E)Absolute advantage risk

Question 11

________ analysis is a method for estimating market activities and potential that measures the factor inflows into production and the resultant outflow of products.

A)Cost-benefit
B)Input-output
C)Financial
D)Opportunity cost
E)Comparative

Question 12

Focusing on labor and capital,the ____________ is the systematic explanation of the source of comparative advantage.

A)factor proportions theory
B)strategic trade theory
C)theory of absolute advantage
D)product cycle theory
E)overlapping product ranges theory

Question 13

The United States is known to be more capital abundant than labor abundant. According to ____________ theory,the U.S.should export capital intensive goods in exchange for labor intensive goods.

A)competitive advantage
B)overlapping product ranges
C)product cycle
D)strategic trade
E)factor proportions

Question 14

Adam Smith explains that industrial societies can increase output using the same labor-hours as in preindustrial society through:

A)Comparative advantage
B)Division of labor
C)Opportunity costs
D)Gains from trade
E)Absolute advantage

Question 15

Although it is generally believed that the United States is a capital abundant country,it has been found on numerous occasions that its exports are more labor intensive than capital intensive. This is known as the:

A)Linder Concern
B)Adam Smith Conundrum
C)Heckscher-Ohlin Problem
D)Leontief Paradox
E)Ricardo Phenomenon

Question 16

What are the two factors of production considered in the factor proportions theory?

A)Technology and capital
B)Land and labor
C)Labor and capital
D)Capital and land
E)Labor and technology

Question 17

At a large zipper factory in China,there is an assembly line of workers. One worker prepares the metal for melting,another sets the molds,a third pours the metal,a forth takes it to the curer,a fifth does quality control,and a sixth packages the zippers for shipment. Through this process,the factory can make thousands of zippers per day. This procedure is best described as:

A)Job enrichment
B)Mercantilism
C)Division of labor
D)Gains from trade
E)Workers compensation

Question 18

Staffan Linder's Overlapping Product Ranges Theory focuses on:

A)Consumer demand
B)Production
C)Commodities supply
D)Agriculture
E)Services

Question 19

The evolution of trade into the form we see today reflects three events: the collapse of feudal society,the emergence of the mercantilist philosophy,and:

A)The Great Depression
B)The establishment of ancient international trade routes
C)The dot.com bust
D)The life cycle of the colonial systems of the European nation-states
E)The emergence a service-centered society

Question 20

The _____________ introduced the benefits of mass production,lowered prices,and increased supply of goods.

A)industrial revolution
B)agricultural revolution
C)communications revolution
D)commodities revolution
E)wireless revolution

Question 21

According to the theory of foreign direct investment,firms that expand across borders may be seeking all of the following EXCEPT:

A)Resources
B)Outputs
C)Knowledge
D)Security
E)Markets

Question 22

Which determinant of national competitive advantage involves conditions in the home-nation that either hinder or aid in the firm's creation and sustaining of international competitiveness?

A)Factor conditions
B)Government support
C)Demand conditions
D)Related and supporting industries
E)Firm strategy,structure,and rivalry

Question 23

The larger the firm,the lower the cost per unit. This is a principle of:

A)Gains from trade
B)Product differentiation
C)Abandoned product ranges
D)Imperfect competition
E)Economies of scale

Question 24

The product cycle theory is most appropriate for which product?

A)Southwest Airlines
B)Chiquita Bananas
C)Woolite carpet cleaner
D)Apple iPad
E)Cutco cutlery

Question 25

In the _________ stage of the product cycle,competition is fierce and profit margins are razor thin.

A)New product
B)Maturing product
C)Standardized product
D)Innovating
E)Absolution

Question 26

The first choice in the foreign direct investment decision is whether to:

A)Acquire a foreign enterprise or build a firm from the ground up
B)Enter into a joint venture or a wholly owned affiliate
C)License or control assets abroad
D)Stay in the domestic market or enter the foreign market
E)Export or produce abroad

Question 27

Argentina is known to simultaneously be an exporter and importer of beef. This shows that the country engages in:

A)Abandoning product ranges
B)Product differentiation
C)Multilateral trade
D)Intra-industry trade
E)Opportunistic trading

Question 28

As far as the production of semiconductors is concerned,the Penang Peninsula in Malaysia is an example of a(n):

A)Competitive cluster
B)Critical enclave
C)Oppressed commune
D)Competitive locale
E)Critical commune

Question 29

Which of the following IS NOT included in Porter's "diamond of national advantage"?

A)Factor conditions
B)Government support
C)Demand conditions
D)Related and supporting industries
E)Firm strategy,structure,and rivalry

Question 30

___________ occur when a firm stops producing a product to pursue economies of scale of another product.

A)Opportunity costs
B)Abandoned product ranges
C)Intra-industry trades
D)Product differentiations
E)Gains from trade

Question 31

After successfully selling a patented cookware product for two years,the Selzon Company has learned that several competitors with slight variations of this product have emerged in the market place. This particular cookware item is likely in what stage of the product cycle?

A)New product
B)Maturing product
C)Standardized product
D)Innovating
E)Decline

Question 32

___________ is the effort to build unique differences or improvements into products.

A)Product differentiation
B)Opportunistic trading
C)Market segmentation
D)Multilateral trading
E)Cost strategy

Question 33

The ___________ represents a collection of forces or drivers.

A)greenfield investment
B)eclectic paradigm
C)capital flight problem
D)import substitution issue
E)brain drain

Question 34

During the _________ stage of the product cycle,the product is nonstandardized,costs of production are very high,and price elasticity of demand is very low.

A)new product
B)maturing product
C)standardized product
D)innovating
E)decline

Question 35

Contrary to popular belief,it is the ______ that initiates trade and the _______ that accepts goods from trade domestically and internationally.

A)Government; government
B)Buyer; government
C)Firm; buyer
D)Firm; government
E)Government; buyer

Question 36

____________ is the establishment or expansion of operations of a firm in a foreign country.

A)Importing
B)Globalization
C)Foreign direct investment
D)Exporting
E)Licensing

Question 37

According to Michael Porter,a nation's competitiveness depends on the capacity of its industry to:

A)Establish trade surpluses
B)Maintain transparency
C)Buy out competitors
D)Innovate and upgrade
E)Cheat and steal

Question 38

All of the following are circumstances involving imperfect competition in strategic trade EXCEPT:

A)Price
B)Cost
C)Service
D)Repetition
E)Externalities

Question 39

Examples of ___________ considerations in the strategic trade theory include the willingness to subsidize workers' education or protecting the industry from foreign competition.

A)price
B)cost
C)service
D)repetition
E)externalities

Question 40

The final decision in the foreign direct investment decision is whether to:

A)Acquire a foreign enterprise or build a firm from the ground up
B)Enter into a joint venture or a wholly owned affiliate
C)License or control assets abroad
D)Stay in the domestic market or enter the foreign market
E)Export or produce abroad

Question 41

According to the strategic trade theory,products pass through four stages: introduction,growth,maturity,and decline.

Question 42

Opportunity costs are the returns foregone on any resource or asset from using it in its next best use.

Question 43

Companies seeking __________ may locate in and around centers of industrial enterprise unique to their specific industry

A)resources
B)factor advantages
C)knowledge
D)security
E)markets

Question 44

According to factor proportion trade theory,a country that is relatively labor abundant should specialize in the production of relatively labor-intensive goods.It should then export those labor-intensive goods in exchange for capital-intensive goods.

Question 45

During the maturing stage in the product cycle,the production process becomes increasingly standardized,the flexibility in design and manufacturing declines,and the demand for highly skilled labor declines.

Question 46

During the age of Mercantilism,governments identified strength with the accumulation of specie,or gold and silver.

Question 47

________ is a policy for economic growth adopted by many developing countries that involves the systematic encouragement of domestic production of goods formerly imported.

A)Internalization
B)Protectionist rights
C)Export substitution
D)Free trade
E)Import substitution

Question 48

Absolute advantage is the ability to produce a good or service more efficiently than it can be produced elsewhere.

Question 49

Wassily Leontief found that the products that U.S.firms exported were relatively more capital intensive than the products the U.S.imported.

Question 50

Although necessary to achieve profits,division of labor decreased the production of workers and industries.

Question 51

Gold and silver were the primary needs of feudal societies living in a state of autarky.

Question 52

Firms interested in acquiring access to linseed oil from Indonesia are seeking:

A)Resources
B)Factor advantages
C)Knowledge
D)Security
E)Markets

Question 53

The ability of multinational firms to be successfully rests on their ability to gain an advantage. This demonstrates imperfections in:

A)Access
B)Factor mobility
C)Government
D)Management
E)Labor

Question 54

The two factors of production considered in Heckscher's and Ohlin's factor proportions trade theory are technology and land.

Question 55

Internal economies of scale occur when the cost per unit increases as the firm grows in scope.

Question 56

Product cycle theory is most appropriate for technology-based products.

Question 57

__________ occurs when a firm establishes its own multinational operation,keeping information that is at the core of its competitiveness within the firm.

A)Free trade
B)Protectionist rights
C)Import substitution
D)Export substitution
E)Internalization

Question 58

The four circumstances involving imperfect competition in which strategic trade may apply include price,cost,repetition,and externalities.

Question 59

Product differentiation is the effort to build unique differences or improvements into products.

Question 60

Competitive advantage is the ability to produce a good or service more cheaply,relative to other goods and services,than is possible in other countries.

Question 61

____________ is the effort to build unique differences or improvements into products.

Question 62

________ is the ability to produce a good or service more efficiently than it can be produced elsewhere.

Question 63

Describe strategic trade theory and the four specific circumstances involving imperfect competition.

Question 64

According to Michael Porter,a nation's competitiveness depends on the capacity of its industry to pressure its rivals.

Question 65

By encouraging domestic production of goods formerly imported,countries are exploiting imperfections in factor mobility.

Question 66

____________ occurs when a firm establishes its own multinational operation,keeping information that is at the core of its competitiveness within the firm.

Question 67

_________ involves separating the production process into distinct stages,where each stage is produced by one individual separately,rather than one individual being responsible for the entire production of the good.

Question 68

__________ are critical masses of unusual competitive success in particular fields.

Question 69

________ is the political and economic policy of the 17th and early 18th centuries aimed at increasing a nation's wealth and power by encouraging the export of goods in return for gold.

Question 70

According to __________ theory,products pass through four stages: introduction,growth,maturity,and decline.

Question 71

Describe the stages of the product cycle.

Question 72

Internalization occurs when a firm establishes its own multinational operation,keeping information that is at the core of its competitiveness within the firm.

Question 73

A(n)______________ is a theoretical method of representing the total productive capacities of a nation used in the formulation of classical and modern trade theory.

Question 74

__________ is the ability to produce a good or service more cheaply,relative to other goods and services,than is possible in other countries.

Question 75

Describe the classical trade theories of absolute advantage and comparative advantage.

Question 76

Competitive clusters are critical masses of unusual competitive success in particular fields or industries.

Question 77

The first choice in the foreign direct investment decision is whether to produce at home and export to foreign markets,or to produce abroad.

Question 78

____________ is a method for estimating market activities and potential that measures the factor inflows into production and the resultant outflow of products.

Question 79

A(n)_____________ is the return forgone on any resource or asset from using it in its next best use.

Question 80

According to ____________,labor and capital combine to explain the source of competitive advantage.