Question 1

The _____ theory 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.

Accepted Answer

The new trade theory 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.

Question 2

The new trade theory points out that through its impact on economies of scale,trade can:

Accepted Answer

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

Question 3

Vernon theorizes that as the market in the U.S.and other advanced nations matures,the product becomes more standardized and price becomes:

Accepted Answer

As the market in the United States and other advanced nations matures,the product becomes more standardized,and price becomes the main competitive weapon.

Question 4

Because of substantial economies of scale,the new trade theory argues that trade can:

Accepted Answer

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

Question 5

Vernon's product life-cycle theory was based on the observation that for most of the 20^th century,a very large proportion of the world's new products had been developed by U.S.firms and sold first in the _____ market.

Accepted Answer

Vernon's theory was based on the observation that for most of the 20^th century,a very large proportion of the world's new products had been developed by U.S.firms and sold first in the U.S.market.

Question 6

According to the product life-cycle theory,the high cost of U.S.labor gave U.S.firms an incentive to:

Accepted Answer

Vernon's theory was based on the observation that for most of the twentieth century a very large proportion of the world's new products had been developed by U.S.firms and sold first in the U.S.market.In addition,the high cost of U.S.labor gave U.S.firms an incentive to develop cost-saving process innovations.

Question 7

Raymond Vernon proposed the product life cycle in the mid-1960s.Vernon argued that two factors gave U.S.firms a strong incentive to develop new consumer products.These two factors were _____ and _____.

Accepted Answer

Vernon's theory was based on the observation that for most of the 20^th century a very large proportion of the world's new products had been developed by U.S.firms and sold first in the U.S.market.To explain this,Vernon argued that the wealth and size of the U.S.market gave U.S.firms a strong incentive to develop new consumer products.

Question 8

What is a possible explanation for the Leontief paradox?

Accepted Answer

One possible explanation of the Leontief paradox is that the United States has a special advantage in producing new products or goods made with innovative technologies.

Question 9

The relevance of the product life-cycle theory in the modern world seems more limited because:

Accepted Answer

Although Vernon's theory may be useful for explaining the pattern of international trade during the brief period of American global dominance,its relevance in the modern world seems more limited.

Question 10

Vernon predicts that as the demand for a new product starts to grow in other advanced countries:

Accepted Answer

Over time,demand for a new product starts to grow in other advanced countries.As it does,it becomes worthwhile for foreign producers to begin producing for their home markets.Consequently,production within other advanced countries begins to limit the potential for exports from the United States.

Question 11

According to Vernon,which of the following factors obviates the need for pioneering U.S.firms to look for low-cost production sites in other countries?

Accepted Answer

The demand for most new products tends to be based on non-price factors.Consequently,firms can charge relatively high prices for new products,which obviates the need to look for low-cost production sites in other countries.

Question 12

82.One of the drawbacks of the Heckscher-Ohlin theory,even though it makes sound theoretical sense,is that:

Accepted Answer

Economists are faced with a difficult dilemma as they prefer the Heckscher-Ohlin theory on theoretical grounds,but it is a relatively poor predictor of real-world international trade patterns.

Question 13

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

Accepted Answer

Economies of scale are unit cost reductions or cost advantages associated with a large scale of output.

Question 14

Vernon argues that pioneering firms kept production facilities closer to the market and centers of decision making because:

Accepted Answer

Just because a new product is developed by a U.S.firm and first sold in the U.S.market,it does not follow that the product must be produced in the United States.It could be produced abroad at some low-cost location and then exported back into the United States.Apparently,pioneering firms believed it was better to keep production facilities close to the market and to the firm's center of decision making,given the uncertainty and risks inherent in introducing new products.

Question 15

Compared to the comparative advantage theory,the product life-cycle theory:

Accepted Answer

The product life-cycle theory fails to account for globalization and integration of world economy,which are accompanied by globally dispersed production,with particular components of a new product being produced in those locations around the globe where the mix of factor costs and skills is most favorable (as predicted by the theory of comparative advantage).

Question 16

One of the key assumptions of the Heckscher-Ohlin theory is that:

Accepted Answer

A key assumption in the Heckscher-Ohlin theory is that technologies are the same across countries.This may not be the case.Differences in technology may lead to differences in productivity,which in turn,drives international trade patterns.

Question 17

The ability to spread fixed costs over a large volume,and the ability of large-volume producers to utilize specialized employees and equipment that are more productive than less-specialized employees and equipment,are both sources of:

Accepted Answer

Economies of scale are unit cost reductions associated with a large scale of output.Economies of scale have a number of sources,including the ability to spread fixed costs over a large volume,and the ability of large-volume producers to utilize specialized employees and equipment that are more productive than less-specialized employees and equipment.

Question 18

Vernon argues 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:

Accepted Answer

Vernon went on to argue that early in the life cycle of a typical new product,while demand is growing 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.

Question 19

Historically,the product life-cycle theory seems to be an accurate explanation of:

Accepted Answer

The evolution in the pattern of international trade is consistent with the predictions of the product life-cycle theory that mature industries tend to go out of the United States and into low-cost assembly locations.Hence,historically the product life-cycle theory has been noted as being an accurate explanation for international trade patterns.

Question 20

The _____ theory began to emerge in the 1970s when some economists pointed out that the ability of firms to attain economies of scale might have important implications for international trade.

Accepted Answer

The new trade theory began to emerge in the 1970s when a number of economists pointed out that the ability of firms to attain economies of scale might have important implications for international trade.

Quiz 5: International Trade Theory

The _____ theory 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.

The new trade theory points out that through its impact on economies of scale,trade can:

Vernon theorizes that as the market in the U.S.and other advanced nations matures,the product becomes more standardized and price becomes:

Because of substantial economies of scale,the new trade theory argues that trade can:

Vernon's product life-cycle theory was based on the observation that for most of the 20^th century,a very large proportion of the world's new products had been developed by U.S.firms and sold first in the _____ market.

According to the product life-cycle theory,the high cost of U.S.labor gave U.S.firms an incentive to:

Raymond Vernon proposed the product life cycle in the mid-1960s.Vernon argued that two factors gave U.S.firms a strong incentive to develop new consumer products.These two factors were _ and _.

What is a possible explanation for the Leontief paradox?

The relevance of the product life-cycle theory in the modern world seems more limited because:

Vernon predicts that as the demand for a new product starts to grow in other advanced countries:

According to Vernon,which of the following factors obviates the need for pioneering U.S.firms to look for low-cost production sites in other countries?

82.One of the drawbacks of the Heckscher-Ohlin theory,even though it makes sound theoretical sense,is that:

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

Vernon argues that pioneering firms kept production facilities closer to the market and centers of decision making because:

Compared to the comparative advantage theory,the product life-cycle theory:

One of the key assumptions of the Heckscher-Ohlin theory is that:

The ability to spread fixed costs over a large volume,and the ability of large-volume producers to utilize specialized employees and equipment that are more productive than less-specialized employees and equipment,are both sources of:

Vernon argues 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:

Historically,the product life-cycle theory seems to be an accurate explanation of:

The _____ theory began to emerge in the 1970s when some economists pointed out that the ability of firms to attain economies of scale might have important implications for international trade.

Quiz 5: International Trade Theory

The _____ theory 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.

The new trade theory points out that through its impact on economies of scale,trade can:

Vernon theorizes that as the market in the U.S.and other advanced nations matures,the product becomes more standardized and price becomes:

Because of substantial economies of scale,the new trade theory argues that trade can:

Vernon's product life-cycle theory was based on the observation that for most of the 20th century,a very large proportion of the world's new products had been developed by U.S.firms and sold first in the _____ market.

According to the product life-cycle theory,the high cost of U.S.labor gave U.S.firms an incentive to:

Raymond Vernon proposed the product life cycle in the mid-1960s.Vernon argued that two factors gave U.S.firms a strong incentive to develop new consumer products.These two factors were _____ and _____.

What is a possible explanation for the Leontief paradox?

The relevance of the product life-cycle theory in the modern world seems more limited because:

Vernon predicts that as the demand for a new product starts to grow in other advanced countries:

According to Vernon,which of the following factors obviates the need for pioneering U.S.firms to look for low-cost production sites in other countries?

82.One of the drawbacks of the Heckscher-Ohlin theory,even though it makes sound theoretical sense,is that:

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

Vernon argues that pioneering firms kept production facilities closer to the market and centers of decision making because:

Compared to the comparative advantage theory,the product life-cycle theory:

One of the key assumptions of the Heckscher-Ohlin theory is that:

The ability to spread fixed costs over a large volume,and the ability of large-volume producers to utilize specialized employees and equipment that are more productive than less-specialized employees and equipment,are both sources of:

Vernon argues 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:

Historically,the product life-cycle theory seems to be an accurate explanation of:

The _____ theory began to emerge in the 1970s when some economists pointed out that the ability of firms to attain economies of scale might have important implications for international trade.

Vernon's product life-cycle theory was based on the observation that for most of the 20^th century,a very large proportion of the world's new products had been developed by U.S.firms and sold first in the _____ market.

Raymond Vernon proposed the product life cycle in the mid-1960s.Vernon argued that two factors gave U.S.firms a strong incentive to develop new consumer products.These two factors were _ and _.