Deck 2: Theories of Trade: Investment and Internationalisation

Question 1

Mercantilism was considered to be the last and most successful theory of international trade.

Answer 1

False

Question 2

Raymond Vernon proposed the product life-cycle theory in the early 1960s in response to the failure of the Heckscher-Ohlin theory to explain the observed pattern of international trade in the US.

Answer 2

True

Question 3

The most contentious implication of new trade theory is that it suggests governments should have no role in trade regulation.

Answer 3

False

Question 4

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

Question 5

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) Internationalisation 'stage' theory
D) The Leontief paradox

Question 6

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

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

Question 7

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

A) firms
B) governments
C) multipoint competition
D) society

Question 8

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 9

A firm that starts international operations soon after formation has become known in the literature as:

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

Question 10

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

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

Question 11

According to Porter's theory, governments 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 12

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

A) labour-intensive
B) manufacturing
C) high-technology
D) mining

Question 13

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

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

Question 14

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

A) 'stage'
B) product life-cycle
C) new trade
D) Heckscher-Ohlin

Question 15

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

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

Question 16

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

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

Question 17

Which of the following has historically been considered an accurate explanation for international trade patterns?

A) Product life-cycle theory
B) Absolute advantage theory
C) Competitive advantage theory
D) Theory of comparative advantage

Question 18

Psychic distance relates to:

A) those factors that impede the flow of information between the firm and an international market.
B) the challenge of overcoming attitudinal differences relating to quality.
C) the distance between the trial stage of a new product and its widespread introduction.
D) the attitudinal difference between the overseas production/manufacturing units and the home-country manufacturing plants.

Question 19

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

A) There are four major stages of internationalisation.
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 20

International new ventures 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 firms.
D) have economies of scale enabling them to enter new markets.

Question 21

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

Question 22

The flaw of mercantilism was that it viewed trade as __________________.

A) a zero-sum game
B) an economic necessity
C) an import-only activity
D) a positive-sum game