Deck 2: Theories of Trade: Investment and Internationalisation

Question 1

Diminishing returns imply that when a firm already has significant value built into its product offering,______lue by a relatively ______mount requires ______costs.

A)decreasing;large;offset
B)increasing;small;significant
C)offsetting;medium;low
D)supporting;low;high

Answer 1

B

Question 2

Capitalism was considered to be the first theory of international trade.

Answer 2

False

Question 3

The most contentious implication of new trade theory is that it generates an argument for government and strategic trade policy.

Answer 3

True

Question 4

Raymond Vernon proposed the product life cycle theory in the mid-1960s and then developed the technology life cycle theory in the 1980s.

Question 5

The theories of international trade claim that promoting free trade is generally in the best interest of a country,although it may not be in the best interest of ______.

A)firms
B)governments
C)contractors
D)society

Question 6

If a national market is large,there should be enough demand to enable producers to realise ______for certain products.

A)profit margins
B)economies of scale
C)a sufficient quantity of buyers
D)efficient allocation

Question 7

A situation in which a gain by one party results in a loss by another is called a zero-sum game.

Question 8

Porter suggested that the four attributes making up the 'diamond' consist of factor endowments,relating and supporting industries,firm strategy and structure and rivalry,and __________.

A)supply conditions
B)demand conditions
C)first-mover advantage
D)late-mover disadvantage

Question 9

A study by Wassily Leontief (1953),having raised questions about the validity of Heckscher-Ohlin theory,became known as the:

A)Leontief paradigm.
B)Leontief principle.
C)Leontief paradox.
D)Leontief parallax.

Question 10

The 'stage' theories suggest that firms initiating imports should target countries that are psychically close.

Question 11

The product life-cycle theory suggests that trade patterns are influenced by where a new product is introduced.

Question 12

New trade theory points out that through its impact on economies of scale,trade can increase the variety of goods available to consumers and decrease the average costs of those goods.

Question 13

Michael Porter's (1990)'Diamond' has four attributes of a nation: (a)factor endowments; (b)domestic demand conditions; (c)relating and supporting industries;and (d)firm strategy,structure and rivalry.Focus therefore centres on national competitive advantage.

Question 14

Which of the following has historically been noted as being an accurate explanation for international trade patterns?

A)product life-cycle theory
B)absolute advantage theory
C)competitive advantage theory
D)the Leontief paradox

Question 15

The theory of national competitive advantage,developed by Michael Porter,focuses on the importance of country factors such as domestic demand and domestic rivalry in explaining a nation's dominance in the production and export of particular products.

Question 16

Free trade is:

A)an agreement between two parties to sell goods to one another with the absence of currency transaction.
B)the re-routing of imports from non-members through the member that has the lowest tariffs in a free trade area.
C)when low-cost external suppliers are replaced by high-cost suppliers inside the free trade area.
D)the absence of barriers to the free flow of goods and services between countries.

Question 17

A contentious issue in the new trade theory is that it generates an argument for _________________________.

A)low-cost production;government intervention
B)increased trade;government intervention
C)government intervention;entrepreneurship
D)government intervention;strategic trade policy

Question 18

According to the textbook,most economists prefer the Heckscher-Ohlin theory to Ricardo's theory (i.e.comparative advantage)because of which of the following two factors?

A)It makes fewer simplifying assumptions and it has been subjected to many empirical tests.
B)It has been subjected to many empirical tests and it has stood the test of time.
C)It makes fewer simplifying assumptions and it has been acknowledged by the World Trade Organization as the better of the two theories.
D)It has been acknowledged as the better of the two theories by the World Trade Organization and it has stood the test of time.

Question 19

The Heckscher-Ohlin theory emphasises the interplay between the proportions in which the factors of production (such as land,labour and capital)are available in different countries,explaining why some countries export oil while others export textiles.

Question 20

Cost advantages associated with large-scale production are called:

A)economies of scale.
B)economies of scope.
C)economies of skill.
D)economies of structure.

Question 21

British economist John Dunning,who became known for developing the eclectic paradigm,suggested the following elements of advantage:

A)operations,localisation and internationalisation.
B)outsourcing,legal and institutional.
C)ownership,location and internalisation.
D)oligopolistic,language and intellectual.

Question 22

New trade theory is at variance with the ___________ 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.

A)Heckscher-Ohlin
B)competitive advantage
C)comparative advantage
D)absolute advantage

Question 23

Of the following,which one is NOT an indicator of why trade is considered to be mutually beneficial to those involved in it?

A)It allows for specialisation.
B)It allows for production of products at higher prices.
C)It affords realisation of scale economies.
D)It affords production of a larger variety of products.

Question 24

The manufacture of standard electronic components is a ___________ process requiring semi-skilled labour.

A)product life-cycle
B)capital-intensive
C)labour-intensive
D)first-mover advantage

Question 25

New trade theory points out that through its impact on economies of scale,trade can increase the variety of goods available to consumers and ______average costs of those goods.

A)alleviate
B)maintain
C)decrease
D)support

Question 26

A firm that starts international operations within six years of establishment seems to be emerging as the broad-based definition in the literature as:

A)a global start-up.
B)an international new venture.
C)a born global.
D)a universal corporation.

Question 27

The theories of ______laim that promoting free trade is generally in the best interest of a country,although it may not be in the best interest of an individual firm.

A)international trade
B)first-mover advantage
C)absolute advantage
D)Adam Smith

Question 28

The economic and strategic advantages that accrue to early entrants in an industry are called:

A)first-mover advantages.
B)initial-class advantages.
C)early entrant advantages.
D)first-stage benefits.

Question 29

Researchers from around the world have identified (mostly)__________ firms that have internationalised rapidly.

A)retail
B)manufacturing
C)high-technology
D)mining

Question 30

In the context of factor endowments,which of the following are considered to be classified as advanced factors?

A)demographics
B)climate and location
C)natural resources
D)skilled labour and research facilities

Question 31

Because of substantial economies of scale,the ______rgues that in many industries there are increasing returns to specialisation.

A)Leontief paradox
B)product life-cycle theory
C)new trade theory
D)Heckscher-Ohlin theory

Question 32

In small national markets such as New Zealand,there may not be enough demand to enable producers to realise ____________ertain products.

A)profit margins
B)economies of scale
C)a sufficient quantity of buyers
D)efficient allocation

Question 33

According to Porter's theory,government should be urged to __________ that will have a favourable impact on each component of the national diamond.

A)reject lobby attempts
B)accept foreign manufacturing techniques
C)adopt policies
D)divest outdated materials

Question 34

The ____________s that due to the presence of substantial scale economies,world demand will support only a few firms in many industries.

A)Heckscher-Ohlin theory
B)Leontief paradox
C)product life-cycle theory
D)new trade theory

Question 35

Porter's theory of national competitive advantage suggests that it is in the best interest of business for a firm to invest in upgrading advanced factors of production.Means for accomplishing this include all but which one of the following?

A)Increase research and development activities.
B)Provide better training for employees.
C)Avoid large capital investments.
D)Develop methods to improve the skill levels of workers.

Question 36

Because of their pivotal role in international trade,______n exert strong influence on government trade policies.

A)individuals
B)entrepreneurs
C)lobbyists
D)businesses

Question 37

According to the Uppsala model of internationalisation,firms will enter markets that are ___________.

A)geographically close
B)psychically close
C)psychically distant
D)geographically distant

Question 38

According to the new trade theory,firms that establish ______antage with regards to the production of a particular new product may subsequently dominate global trade in that product.

A)a competitive
B)a comparative
C)an absolute
D)a first-mover

Question 39

____________re unit cost reductions associated with a large scale of output.

A)Comparative advantages
B)Competitive advantages
C)Economies of scale
D)Positive-sum games

Question 40

A born global is a firm that:

A)internationalises rapidly.
B)internationalises through joint venture.
C)globalises in an incremental,sequential manner.
D)internationalises within 20 years of inception.

Question 41

_________ refers to a situation where a government does not attempt to influence through quotas or duties what its citizens can buy from another country or what they can produce and sell to another country.

A)Autonomous trade
B)Free trade
C)Clear commerce
D)Unencumbered commerce

Question 42

In relation to the stage models of internationalisation,which of the following statements is incorrect?

A)There are two major categories of stage models.
B)The stage models are limited in their ability to predict the internationalisation of small- to medium-sized firms.
C)The stage models suggest an incremental sequential approach to internationalisation.
D)Some researchers have criticised the stage models for being too 'deterministic'.

Question 43

The Uppsala model of internationalisation identified four different stages in entering an international market.Which of the following is NOT a stage identified in the Uppsala model?

A)no regular export activity
B)export via independent representatives (agents)
C)trial stage
D)overseas production/manufacturing units

Question 44

All of the following have important implications for international trade and international theory on business practice except:

A)first-mover advantage.
B)government trade policy.
C)location.
D)consumer confidence.

Question 45

Which of the following has historically been noted as being an accurate explanation for international trade patterns?

A)Product life-cycle theory.
B)Absolute advantage theory.
C)Competitive advantage theory.
D)Leontief paradox.

Question 46

International new ventures (INVs)and 'born globals' internationalise rapidly due to reduced trade barriers and shorter product life cycles.These firms:

A)do not follow an incremental sequential process to internationalisation.
B)follow a definitive path in their development based on scale.
C)are technology,media and telecommunications (TMT)firms.
D)have an absolute advantage in the marketplace.

Question 47

The flaw with mercantilism was that it viewed trade as ____________.

A)a zero-sum game
B)an economic necessity
C)a non-essential economic activity
D)a positive-sum game

Question 48

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

A)Cormier
B)Heckscher-Ohlin
C)Vernon
D)Smith

Question 49

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

A)Adam Smith/Comparative advantage
B)David Ricardo/New trade
C)Raymond Vernon/Product life cycle
D)Eli Heckscher/Absolute advantage

Question 50

Considered to be the first theory of international trade,________ principal assertion was that gold and silver were the mainstays of national wealth and essential to vigorous commerce.

A)collectivism's
B)mercantilism's
C)capitalism's
D)economic conservatism's