Deck 6: International Trade and Investment

Question 1

In 2017, China accounted for approximately ________ of the world's merchandise exports.

A) 13.2 percent
B) 25 percent
C) 40 percent
D) 55 percent

Answer 1

A

Question 2

According to mercantilism, what should a country's primary goal be?

A) protecting citizens from unfair labor practices
B) encouraging imports to prevent resource depletion
C) promoting exports to enlarge gold and silver holdings
D) ensuring sufficient labor for low-wage jobs in the textile industry

Answer 2

C

Question 3

In the United States, sugar growers, steel companies, and the AFL-CIO are supporters of mercantilist policies. These groups are best characterized as ________.

A) protectionists
B) communists
C) isolationists
D) federalists

Answer 3

A

Question 4

How can an understanding of international trade theories and foreign investment theories benefit MNEs?

Question 5

Who is the father of free market economics?

A) David Ricardo
B) Michael Porter
C) Adam Smith
D) John Dunning

Question 6

Since World War II, world trade has ________.

A) grown slightly
B) shrunk slightly
C) shrunk significantly
D) grown dramatically

Question 7

The first theories of international trade used ________ as a unit of analysis.

A) individual countries
B) country clusters
C) regions
D) continents

Question 8

Ellis, a manager at an MNE, is studying international trade theories. In his current position, Ellis would most likely use this knowledge to ________.

A) lobby for trade policy changes
B) identify promising export and investment opportunities
C) predict factors that motivate trade
D) analyze foreign exchange markets

Question 9

What are the indirect effects of international trade? How do exports spark economic activity in a country?

Question 10

What type of trade was the early country-based theories of international trade most useful in understanding?

A) services
B) brand name goods
C) commodities
D) high-tech goods

Question 11

Which of the following was harmed the most by mercantilist policies?

A) monarchs
B) local politicians
C) individual consumers
D) domestic manufacturers

Question 12

What motivates firms to become involved in international trade and foreign direct investment?

Question 13

Thanks to the emergence of China as a major exporting nation, Japan, Canada, the European Union, and the United States accounted for just 49.2 percent of the world's merchandise exports in 2017.

Question 14

During which century were the first theories of international trade developed?

A) sixteenth
B) seventeenth
C) eighteenth
D) nineteenth

Question 15

The theory of ________ maintains that a country's wealth is measured by its holdings of gold and silver.

A) mercantilism
B) neomercantilism
C) competitive advantage
D) comparative advantage

Question 16

The center of the international commercial flower industry is ________.

A) the Netherlands
B) the United States
C) France
D) Germany

Question 17

What are the primary forms of international business?

Question 18

The term ________ refers to the voluntary exchange of goods, services, assets, or money between one person or organization and another.

A) sales
B) transaction
C) trade
D) strategic management

Question 19

In 2016, total international merchandise trade accounted for about ________ percent of the world's GDP.

A) 12
B) 21
C) 44
D) 59

Question 20

World trade initially grew after World War II, but in the last decade has dropped off and been replaced with FDI.

Question 21

The ________ of a good is the value of what is given up to get the good.

A) relative cost
B) opportunity cost
C) absolute cost
D) discount cost

Question 22

Adam Smith was best known as an advocate of ________.

A) low-cost manufacturing
B) free-market economics
C) mercantilism
D) labor unions

Question 23

Mercantilism ________.

A) suggests that a country should export those goods for which it is more productive than other countries and trade for those goods for which other countries are more productive
B) maintains that a country's wealth is measured by its holdings of gold and silver
C) suggests that a country will have a comparative advantage in producing products that intensively use resources it has in abundance
D) argues that most trade in manufactured goods should be between countries with similar per capita incomes

Question 24

Which theory suggests that a country should export those goods and services for which it is more productive than other countries and import those goods and services for which other countries are more productive?

A) mercantilism
B) comparative advantage
C) absolute advantage
D) specialization of countries

Question 25

Which theory listed below is also called the Heckscher-Ohlin theory?

A) relative advantage
B) comparative advantage
C) relative factor endowments
D) specialization of countries

Question 26

Which theory answers the question, "What determines the products for which a country will have a comparative advantage?"

A) relative advantage
B) absolute advantage
C) relative factor endowments
D) specialization of countries

Question 27

Which theory suggests that a country should produce and export those goods and services for which it is relatively more productive than other countries and import those goods and services for which other countries are relatively more productive?

A) relative advantage
B) comparative advantage
C) absolute advantage
D) specialization of countries

Question 28

Which of the following statements is most likely true?

A) Japan eliminated all protectionist policies after WWII.
B) Nearly all countries have some neomercantilist policies.
C) China is one of the few countries with protectionist policies.
D) EU countries are supportive of U.S. neomercantilist policies.

Question 29

Japan exports Toshiba Computers to the United States, and the United States exports Apple Computers to Japan. This is an example of ________.

A) mercantilism
B) diversification
C) interindustry trade
D) intraindustry trade

Question 30

Which of the following was determined by Leontief?

A) U.S. exports were less capital intensive than imports.
B) U.S. exports were more capital intensive than imports.
C) Relative factor endowments were not a factor in determining trade patterns.
D) Specialization was not a factor in determining imports and exports.

Question 31

Which factors of production did Leontief focus on?

A) land and labor
B) land and technology
C) capital and labor
D) labor and technology

Question 32

What did Adam Smith believe about the ultimate effects of mercantilist policies on the health of a country's economic situation?

A) Mercantilist policies strengthen an economy by protecting against competition.
B) Mercantilist policies result in strong rates of unemployment.
C) Mercantilist policies reduce the wealth of a country as a whole.
D) Mercantilist policies harm special interest groups.

Question 33

Early theories of international trade focused on the patterns of exports and imports in individual countries.

Question 34

Which theory incorporates the concept of opportunity cost?

A) comparative advantage
B) mercantilism
C) absolute advantage
D) factor endowments

Question 35

Leontief predicted that if the Heckscher-Ohlin theory held, then the United States would ________.

A) import capital-intensive goods
B) import products such as steel
C) export products such as shoes
D) export bulk chemicals and steel

Question 36

Which statement is asserted by the theory of absolute advantage?

A) A country should export those goods for which it is more productive than other countries and trade for those goods for which other countries are more productive.
B) A country should import goods from developing economies in order to maximize returns on profit and economies of scale.
C) A country will have a comparative advantage if it makes products that rely on global supply networks.
D) Most trade in manufactured goods should be between countries with similar per capita incomes.

Question 37

The primary flaw in the theory of absolute advantage is that the theory ________.

A) confuses the acquisition of treasure with the acquisition of wealth
B) looks only at relative productivity differences rather than competitive differences
C) suggests that no trade will occur when one country has an absolute advantage in multiple products
D) incorporates the concept of opportunity cost in determining which goods a country should produce

Question 38

Which theory promotes the notion of specializing in what you do relatively best?

A) country similarity
B) comparative advantage
C) product life cycle
D) absolute advantage

Question 39

Saudi Arabia has large crude oil reserves, and Bangladesh has a large pool of skilled workers. These are both examples of ________.

A) factor endowments
B) economies of scope
C) production factors
D) opportunity costs

Question 40

The Heckscher-Ohlin theory ________.

A) suggests that a country should export those goods for which it is more productive than other countries and trade for those goods for which other countries are more productive
B) states that a country should produce and export those goods for which it is relatively more productive than other countries and import those goods for which other countries are relatively more productive than it is
C) suggests that a country will have a comparative advantage in producing products that intensively use resources it has in abundance
D) argues that most trade in manufactured goods should be between countries with similar per capita incomes

Question 41

Adam Smith attacked the intellectual basis of mercantilism in 1776.

Question 42

The Heckscher-Ohlin theory is another name for the product life cycle theory.

Question 43

What is the goal of mercantilism? How is mercantilism implemented? What are the disadvantages of mercantilism?

Question 44

The theory of absolute advantage considers relative productivity differences between countries.

Question 45

Brand name is an important component in a customer's purchase decision for commodities.

Question 46

What is the key difference between the theory of comparative advantage and the theory of absolute advantage? Which theory do you support? Why?

Question 47

An "unfavorable" balance of trade indicates that a country's exports are less than its imports.

Question 48

The firm-based theories developed after World War II help explain patterns of trade in commodities.

Question 49

Explain what determines the products for which a country has a comparative advantage.

Question 50

Why was Adam Smith opposed to mercantilism? What was the premise of Smith's theory?

Question 51

What theories are categorized as firm-based theories? Which theories are categorized as country-based trade theories? What does each type of theory help explain?

Question 52

According to mercantilism, a nation's wealth is determined by its holdings of gold and silver.

Question 53

Leontief found that the United States was producing and exporting capital-intensive goods.

Question 54

What is opportunity cost? Why is opportunity cost an important consideration when determining what a country should export and import?

Question 55

North Americans and Europeans have long applauded Japan's open door policy with regard to imports.

Question 56

Adam Smith developed the theory of comparative advantage.

Question 57

Many countries have adopted some neomercantilist policies to protect key industries.

Question 58

The theory of comparative advantage uses the concept of opportunity cost to determine which good a country should produce.

Question 59

Why is the notion of specialization important when analyzing the benefits of free trade?

Question 60

What does the relative factor endowment theory suggest about a country's comparative advantage?

Question 61

Which international trade theory originated in the marketing field?

A) new trade theory
B) product life cycle theory
C) country similarity theory
D) theory of competitive advantage

Question 62

Which of the following factors are not included in Porter's view of factor endowments?

A) land
B) capital
C) work ethic of workforce
D) educational level of workforce

Question 63

France exports wine to Japan, and Japan exports clock radios to France. This is an example of ________.

A) mercantilism
B) diversification
C) interindustry trade
D) intraindustry trade

Question 64

Coffman Electronics produces small, portable printers. The market for the product has stabilized, and Coffman has shifted production to Taiwan. However, Coffman's marketing department in the United States remains responsible for advertising and branding decisions. Coffman Electronics is most likely in the ________ product stage of the product life cycle.

A) globalized
B) standardized
C) maturing
D) new

Question 65

________ economies occur when a firm's costs of production decline as the number of firms in that industry increase within a given area.

A) Agglomeration
B) Consolidation
C) Accommodation
D) Divergent

Question 66

In which stage of the international product life cycle does the innovating firm's country become a net importer of the product?

A) new product stage
B) maturing product stage
C) standardized product stage
D) never

Question 67

________ argued that firms struggle to develop some sustainable competitive advantage which they then exploit to dominate the global marketplace.

A) Porter
B) Vernon
C) Heckscher and Ohlin
D) Krugman and Lancaster

Question 68

Who developed the theory of national competitive advantage?

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

Question 69

Taylor Helmets has been able to lower the average cost of producing a bicycle helmet as it increases the number of helmets it manufactures each day. Taylor Helmets is most likely benefiting from ________.

A) opportunity costs
B) economies of scope
C) economies of scale
D) competitive advantages

Question 70

The country similarity theory ________.

A) suggests that a country should export those goods for which it is more productive than other countries and trade for those goods for which other countries are more productive
B) states that a country should produce and export those goods for which it is relatively more productive than other countries and import those goods for which other countries are relatively more productive than it is
C) suggests that a country will have a comparative advantage in producing products that intensively use resources it has in abundance
D) argues that most trade in manufactured goods should be between countries with similar levels of economic development

Question 71

What is the primary focus of the new trade theory developed by Krugman, Helpman, and Lancaster?

A) protecting intellectual property rights
B) expanding research and development
C) developing economies of scale
D) exploiting the experience curve

Question 72

Porter's theory of national competitive advantage can best be described as a ________.

A) country-based theory
B) firm-based theory
C) hybrid of country-based and firm-based theories
D) government-focused theory based on economies of scale

Question 73

Which theory of international trade explains that success in international trade comes from the interaction of four country- and firm-specific elements?

A) national competitive advantage
B) country similarity
C) absolute advantage
D) relative factor endowments

Question 74

In the ________ stage of the international product life cycle, the product becomes commodity-like and price becomes very important.

A) new product
B) maturing product
C) standardized product
D) international product

Question 75

MAX Electronics produces tiny wireless speakers that can be used with computers and MP3 players. The firm has built new factories to expand capacity and meet increasing domestic and foreign demand. Over the last six months, foreign and domestic competitors have emerged with a similar product in an attempt to benefit from high consumer demand. MAX Electronics is most likely in the ________ product stage of the product life cycle.

A) globalized
B) standardized
C) maturing
D) new

Question 76

Which of the following is one of the four elements discussed in the theory of national competitive advantage?

A) factor conditions
B) opportunity costs
C) equity conditions
D) market saturation rates

Question 77

Why did country-based trade theories develop? Why did firm-based trade theories develop?

Question 78

The country similarity theory suggests that most trade in manufactured goods should be between countries with similar ________.

A) labor costs
B) economic development
C) natural resources
D) cultures and languages

Question 79

Pandora Housewares is an MNE with production facilities in Taiwan, England, and India that manufacture bedding, towels, clothing, and luggage. Pandora has benefited from ________ because the firm's average costs have decreased as the number of different products it sells has increased.

A) government contractor
B) significant capital
C) natural resources
D) niche marketer

Question 80

Which of the following is one of the stages in the international product life cycle theory?

A) pre-invention product stage
B) modified product stage
C) maturing product stage
D) fad product stage