Which trade theory contends that a country that initially develops and exports a new product may eventually become an importer of it and may no longer manufacture the product?
A) Theory of factor endowments
B) Theory of overlapping demands
C) Economies of scale theory
D) Product life cycle theory

Question

Quizplus · Accepted Answer

The Product life cycle theory states that a country that initially develops and exports a new product may eventually become an importer of it and may no longer manufacture the product. This is because the product goes through different stages of maturity, starting from introduction, growth, maturity, and decline. As the product reaches the decline stage, it becomes less profitable to produce it locally, and the importing of the product becomes more economical.

Which Trade Theory Contends That a Country That Initially Develops