Question 1

Identify the theory that argues that advanced nations have an incentive to develop a new offering and hence such nations always tend to create a good or service for the first time.

Accepted Answer

The theory argues that the wealth of such advanced countries as the United States gives them an incentive to develop new consumer goods. Such nations always develop new products.

Question 2

Country X,a poor country,invents a revolutionary electronic product.The country markets this new product in other poor countries to garner large profits.This occurrence is against the idea of _____.

Accepted Answer

The theory argues that the wealth of such advanced countries as the United States gives them an incentive to develop new consumer goods. The theory also argues that new products are always introduced in developed nations.

Question 3

Which of the following is a major disadvantage of the product life-cycle theory introduced by Vernon?

Accepted Answer

Vernon's argument that most new products are developed and introduced in the United States seems ethnocentric and increasingly dated.

Question 4

Which of the following theories stress the role of luck,entrepreneurship,and innovation in the production and export of a good or service by the firms in a country?

Accepted Answer

New Trade theory suggests that a country may predominate in the export of a good simply because it was lucky enough to have one or more firms among the first to produce that good. New trade theorists stress the role of luck, entrepreneurship, and innovation in giving a firm first mover advantages.

Question 5

Explain the concept of free trade.

Accepted Answer

The answer of Explain the concept of free trade....

Question 6

Which of the following is an example of a basic factor that a nation will possess as proposed by Porter?

Accepted Answer

Such factors as natural resources, climate, location, and demographics are basic factors. Factors such as communication infrastructure, sophisticated and skilled labor, research facilities, and technological know-how are examples of and advanced factors.

Question 7

Identify the theory that predicts that countries will export those goods that make intensive use of factors that are locally abundant.

Accepted Answer

The Heckscher-Ohlin theory predicts that countries will export those goods that make intensive use of factors that are locally abundant, while importing goods that make intensive use of factors that are locally scarce.

Question 8

Which of the following accounts records transactions that involve the purchase or sale of assets?

Accepted Answer

The financial account (formerly the capital account) records transactions that involve the purchase or sale of assets.

Question 9

Company A entered the production of office software before its competitors.Because of this,the company's products are more familiar among and favored by customers.This situation exemplifies the _____.

Accepted Answer

First mover advantages are the economic and strategic advantages that accrue to early entrants into an industry.

Question 10

A country's balance-of-payments accounts keep track of the _____.

Accepted Answer

A country's balance-of-payments accounts keep track of the payments to and receipts from other countries for a particular time period.

Question 11

Which of the following balance-of-payment accounts records one-time changes in the stock of assets?

Accepted Answer

The capital account records one-time changes in the stock of assets.

Question 12

Textile industry in a nation is characterized by vigorous domestic rivalry.Which of the following observations of this nation's international competency is most likely to be true?

Accepted Answer

Porter's second point is that there is a strong association between vigorous domestic rivalry and the creation and persistence of competitive advantage in an industry. Vigorous domestic rivalry induces firms to look for ways to improve efficiency, which makes them better international competitors.

Question 13

Which of the following is the reason why most economists prefer Heckscher-Ohlin theory to Ricardo's theory?

Accepted Answer

Most economists prefer the Heckscher-Ohlin theory to Ricardo's theory because it makes fewer simplifying assumptions.

Question 14

Which of the following terms refers to the unit cost reductions associated with large sized outputs?

Accepted Answer

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

Question 15

Which of the following is one of the four attributes present in Porter's diamond?

Accepted Answer

Porter theorizes four broad attributes of a nation shape the environment in which local firms compete. These four factors are factor endowments, demand conditions, relating and supporting industries, and firm strategy, structure, and rivalry.

Question 16

Wal-Mart makes bulk purchases from its vendors and hence it is able to get better deals than its competitors.This allows Wal-Mart to offer greater discounts to its customers.In this case,Wal-Mart benefits from _____.

Accepted Answer

Economies of scale are unit cost reductions associated with a large scale of output. Here, Wal-Mart is benefiting from the economies of scale.

Question 17

Which of the following factors,according to Porter's national Diamond,is most likely to give a country competitive advantage over another country?

Accepted Answer

Factors such as communication infrastructure, sophisticated and skilled labor, research facilities, and technological know-how are examples of and advanced factors. Porter argues that advanced factors are the most significant for competitive advantage.

Question 18

Which of the following statements is true of the Leontief Paradox?

Accepted Answer

Leontief Paradox raised questions about the validity of the Heckscher-Ohlin theory.

Question 19

Porter argues that a nation's firms gain competitive advantage if _____.

Accepted Answer

Porter argues that a nation's firms gain competitive advantage if their domestic consumers are sophisticated and demanding.

Question 20

Which of the following theories suggests that first mover advantage is significant in the export of a good?

Accepted Answer

New Trade theory suggests that a country may predominate in the export of a good simply because it was lucky enough to have one or more firms among the first to produce that good. Because they are able to gain economies of scale, the first movers in an industry may get a lock on the world market that discourages subsequent entry.

Quiz 6: International Trade Theory