Professor Baldwin believes that early in the life cycle of a U.S. product, demand in other advanced countries is limited to high-income groups. Consequently, it is seldom worthwhile for firms in those countries to start producing the product. This view conforms to
A) the product life-cycle theory.
B) Ricardo's theory.
C) the theory of absolute advantage.
D) the theory of comparative advantage.

Question

Quizplus · Accepted Answer

In his product life-cycle theory, Raymond Vernon argued that early in the life cycle of a typical new product, while demand is starting to grow rapidly in the United States, demand in other advanced countries is limited to high-income groups. The limited initial demand in other advanced countries does not make it worthwhile for firms in those countries to start producing the new product, but it does necessitate some exports from the United States to those countries.

Professor Baldwin Believes That Early in the Life Cycle of a U.S