Question 1

New trade theory supports the ideas that trade increases specialization of production and it also
A) lowers average prices.
B) decreases the number of available products.
C) is not dependent on government intervention to succeed.
D) distances itself from customization of products.
E) is reliant upon factor endowments.

Accepted Answer

New trade theory suggests that trade can lead to economies of scale, which can lower average costs and prices due to increased specialization and larger market access.

Question 2

New trade theory argues that, through its impact on economies of scale, trade can
A) increase the average costs of goods.
B) enable the global market to support a wide range of enterprises.
C) negatively affect the first-mover advantage for all products
D) increase the variety of goods available to consumers.
E) prevent diminishing of returns and promote constant returns to specialization.

Accepted Answer

The answer of New trade theory argues that, through its...

Question 3

The new trade theory is at variance with which 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) product life-cycle
C) comparative advantage
D) absolute advantage
E) national competitive advantage

Accepted Answer

The Heckscher-Ohlin theory suggests that a country will export products that use its abundant and cheap factors of production intensively, which contrasts with the new trade theory that emphasizes economies of scale and network effects.

Question 4

According to new trade theory, what is most likely to be a result of market expansion due to trade?
A) A wide variety of products is produced at greater unit costs than in the absence of trade.
B) As the variety of products increases, demand for individual products decreases, leading to non-realization of economies of scale.
C) Each nation may specialize in producing a narrower range of products, importing goods that it does not make.
D) The ability to capture first-mover advantages is restricted in a world that allows trade.
E) When countries do not differ in their resource endowments or technology, trade does not offer mutual benefits.

Accepted Answer

New trade theory suggests that market expansion due to trade allows countries to specialize in producing a narrower range of products, benefiting from economies of scale, and import goods that they do not produce.

Question 5

Software development is an expensive process, but manufacturers are able to spread out the costs of the development over the hundreds of thousands of software packages sold to consumers. What is helping to drive down costs per unit in this situation?
A) antidumping measures
B) economies of scale
C) diminishing returns
D) labor productivity
E) first-mover advantages

Accepted Answer

Economies of scale help drive down costs per unit as the fixed costs of development are spread over a large number of units sold, reducing the cost per unit.

Question 6

The purpose of Porter's study of national competitive advantage was to
A) identify the various stages of the life cycle of a product.
B) determine why a country achieves international success in a particular industry.
C) determine how trade barriers affect the prices of products in the international market.
D) determine how pre-industrialization theories predict international trade patterns.
E) organize the relationship between factor endowments and economies of scale.

Accepted Answer

Porter's study of national competitive advantage focused on identifying the factors that contribute to a country's success in a particular industry.

Question 7

Mallory works for a company that produces cell phone component parts. Her company developed a component that no competitor had and was soon enjoying economies of scale as the only producers of the part. Which trade theory is most reflected in the success of this company?
A) Product-life cycle
B) Absolute advantage
C) New trade theory
D) Mercantilism
E) Comparative advantage

Accepted Answer

New trade theory suggests that through economies of scale and network effects, companies can achieve a dominant position in the market, which is reflected in Mallory's company being the sole producer of a unique component.

Question 8

One barrier to subsequent entries in an industry dominated by first movers is
A) a laissez-faire stance toward trade adopted by first movers.
B) implementation of policies to maximize imports and minimize exports.
C) specializing in the production of goods for which firms have a comparative advantage.
D) the ability of first movers to benefit from increasing returns.
E) a decrease in the variety of goods available to consumers and increase in the cost of existing goods.

Accepted Answer

First movers often benefit from increasing returns due to economies of scale, network effects, and brand recognition, making it difficult for subsequent entrants to compete effectively.

Question 9

The economic and strategic advantages that accrue to early entrants in an industry are called
A) first-mover advantages.
B) comparative advantages.
C) absolute advantages.
D) economies of scale.
E) factor endowments.

Accepted Answer

First-mover advantages refer to the benefits that a company gains by being the first to enter a new market or industry, such as establishing strong brand recognition, customer loyalty, and securing key resources or technologies.

Question 10

Intel spreads the huge fixed costs of developing new generation chips over the nearly 2 billion chips it sells to computer makers. Intel benefits from
A) comparative advantages.
B) factor endowments.
C) economies of scale.
D) diminishing returns.
E) absolute advantages.

Accepted Answer

Intel benefits from economies of scale, as spreading fixed costs over a large number of units reduces the average cost per unit.

Question 11

According to new trade theory, trade, through its impact on economies of scale, is most likely to
A) reduce the volume of the goods produced.
B) decrease the variety of goods available to consumers.
C) decrease the average costs of goods.
D) inhibit first-mover advantages in all industries.
E) benefit only nations that differ in resource endowments or technology.

Accepted Answer

New trade theory suggests that trade can lead to economies of scale, which in turn can decrease the average costs of goods, allowing firms to produce at a larger scale and reduce costs per unit.

Question 12

Economies of scale are achieved as the result of ________ that creates unit cost reductions.
A) trade policies
B) increased tariffs
C) large scale output
D) diminishing returns
E) absolute advantages

Accepted Answer

Economies of scale occur when increased production leads to lower costs per unit due to factors like spreading fixed costs over more units and operational efficiencies.

Question 13

The new trade theory diverts from its advocacy of free trade by suggesting that
A) the price of a new product increases along with the increase in the popularity of the product.
B) nations benefit from trade even in the absence of resource endowments and technology.
C) there is an economic rationale for a proactive trade policy.
D) the role of luck, entrepreneurship, and innovation is important in giving a firm first-mover advantages.
E) market expansion leads to better realization of economies of scale.

Accepted Answer

New trade theory suggests that there can be an economic rationale for a proactive trade policy because it recognizes the role of economies of scale and network effects, which can justify government intervention to support industries that can achieve a competitive advantage.

Question 14

What might result in the absence of trade, if certain products have small national markets?
A) The variety of products available to consumers increases.
B) Limited demand for such products leads to non-realization of economies of scale.
C) Each nation will specialize in producing a narrower range of products than it would in the presence of trade.
D) At low volumes of production, unit costs and prices would be lowered.
E) The first movers in an industry may get a lock on the world market that discourages subsequent entry.

Accepted Answer

Limited demand for products in small national markets can prevent economies of scale from being realized, as production volumes may be too low to reduce costs effectively.

Question 15

New trade theory dictates that trade offers an opportunity for mutual gain when countries do not differ in their resource endowments or technology because trade
A) results in a contraction of the size of the markets of individual firms.
B) allows for production of products at higher prices.
C) increases the variety of goods available to consumers and lowers the costs of those goods.
D) allows countries to attain self-sufficiency in the production of all goods.
E) guarantees first-mover advantages to all the countries that engage in trade.

Accepted Answer

New trade theory suggests that trade can increase the variety of goods available to consumers and lower the costs of those goods due to economies of scale and increased market competition.

Question 16

One of the suggestions of new trade theory is that
A) differences in technology leads to differences in productivity, which in turn, drives international trade patterns.
B) nations may benefit from trade irrespective of resource endowments or technology.
C) the demand for most new products tends to be based on nonprice factors.
D) globally dispersed production reduces the production costs of mature products.
E) comparative advantage does not arrive from a difference in factor endowments but from a difference in productivity.

Accepted Answer

New trade theory suggests that nations can benefit from trade due to economies of scale and network effects, even if they do not have differences in resource endowments or technology.

Question 17

Which of the following theories states that in those industries where the output required to attain economies of scale represents a significant proportion of total world demand, the global market may be able to support only a small number of enterprises?
A) Heckscher-Ohlin
B) comparative advantage
C) product life-cycle
D) new trade
E) absolute advantage

Accepted Answer

The new trade theory suggests that in industries with significant economies of scale, the global market may only support a few large firms, leading to a concentration of market power and the dominance of a few enterprises.

Question 18

What is an advantage that is realized by a company as a part of first-mover advantages?
A) increasing returns to specialization
B) positive-sum game due to lack of competition
C) ability to capture scale economies ahead of later entrants
D) absolute advantage and higher efficiency
E) ability to specialize in the production of a particular product

Accepted Answer

First-mover advantage allows a company to capture scale economies ahead of later entrants, giving them a cost advantage and potentially establishing a strong market position.

Question 19

Airbus pioneered the development of the new superjumbo jet at a cost of $15 billion. It quickly obtained contracts for much of the 400 units that are expected to be ordered in the next 20 years, thereby effectively shutting out its competitor, Boeing. Airbus benefits from
A) first-mover advantages.
B) comparative advantages.
C) absolute advantages.
D) economies of scale.
E) factor endowments.

Accepted Answer

Airbus benefits from first-mover advantages by being the first to develop and market the superjumbo jet, allowing it to secure contracts and establish a strong market position before its competitor, Boeing.

Question 20

One of the most controversial aspects of ________ is that it supports government intervention and strategic trade policy.
A) the theory of absolute advantage
B) the theory of comparative advantage
C) Heckscher-Ohlin theory
D) new trade theory
E) product life-cycle theory

Accepted Answer

New trade theory suggests that government intervention can help firms achieve economies of scale and become competitive in international markets, which is a controversial aspect.

Quiz 6: International Trade Theory

New trade theory supports the ideas that trade increases specialization of production and it also

New trade theory argues that, through its impact on economies of scale, trade can

The new trade theory is at variance with which 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?

According to new trade theory, what is most likely to be a result of market expansion due to trade?

Software development is an expensive process, but manufacturers are able to spread out the costs of the development over the hundreds of thousands of software packages sold to consumers. What is helping to drive down costs per unit in this situation?

The purpose of Porter's study of national competitive advantage was to

Mallory works for a company that produces cell phone component parts. Her company developed a component that no competitor had and was soon enjoying economies of scale as the only producers of the part. Which trade theory is most reflected in the success of this company?

One barrier to subsequent entries in an industry dominated by first movers is

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

Intel spreads the huge fixed costs of developing new generation chips over the nearly 2 billion chips it sells to computer makers. Intel benefits from

According to new trade theory, trade, through its impact on economies of scale, is most likely to

Economies of scale are achieved as the result of ________ that creates unit cost reductions.

The new trade theory diverts from its advocacy of free trade by suggesting that

What might result in the absence of trade, if certain products have small national markets?

New trade theory dictates that trade offers an opportunity for mutual gain when countries do not differ in their resource endowments or technology because trade

One of the suggestions of new trade theory is that

Which of the following theories states that in those industries where the output required to attain economies of scale represents a significant proportion of total world demand, the global market may be able to support only a small number of enterprises?

What is an advantage that is realized by a company as a part of first-mover advantages?

Airbus pioneered the development of the new superjumbo jet at a cost of $15 billion. It quickly obtained contracts for much of the 400 units that are expected to be ordered in the next 20 years, thereby effectively shutting out its competitor, Boeing. Airbus benefits from

One of the most controversial aspects of ________ is that it supports government intervention and strategic trade policy.