Question 1

The total value of international trade (2008)in services and merchandise is about

Accepted Answer

The total value of international trade was $20 trillion in 2008.

Question 2

NAFTA is a free-trade agreement between the countries of

Accepted Answer

NAFTA is the free trade agreement between the United States,Canada,and Mexico.

Question 3

International trade is still mostly concentrated among the developed countries of the Northern Hemisphere.Which country is the largest exporter of the world?

Accepted Answer

Germany is the largest exporter in the world,and exports about 10 percent more than the United States and 20 percent more than China.

Question 4

On occasion,a firm will respond to a competitor's move by retaliating.For example,Linde Gas (an American firm producing industrial gasses)entered the French market when Air Liquide (a French company in the same industry)decided to enter the U.S.market.Such a move is considered a

Accepted Answer

Linde Gas and Air Liquide are not mentioned in the text; however,this is a typical retaliatory action that drives a company to enter a foreign market which it had no intention to enter in the first place.

Question 5

The International Product Life Cycle Theory explains why there are no televisions manufactured in Great Britain and the United States,although that technology was invented in those countries.

Accepted Answer

The International Product Life Cycle Theory suggests that as products mature, production locations shift to lower-cost countries, leading to the cessation of manufacturing in high-cost countries like Great Britain and the United States, despite these countries being the origin of the technology.

Question 6

According to the International Product Life Cycle Theory,the country(ies)most likely to manufacture a product that has been recently developed (one that is the result of a brand-new design and uses patented technology)and is in its first commercialization year,is (are)

Accepted Answer

According to Vernon,the only country in which products that are newly developed are manufactured is the country of innovation.The manufacturing eventually shifts to other developed countries and then to developing countries.

Question 7

Argentina can produce 1 ton of meat (beef)using 0.1 years of labor.It can also produce 1 automobile using 2 years of labor.In order to produce 1 ton of beef,the United States uses 0.2 years of labor.It can produce an automobile using 1.5 years of labor.Argentina has

Accepted Answer

Argentina uses less labor for the production of 1 ton of beef than the United States does.

Question 8

Russia can produce 25 tons of steel or 5 automobiles using the same amount of resources.Using the exact same amount of resources,India can produce 18 tons of steel and 3 automobiles.According to the theory of comparative advantage,at what price will Russia and India trade chairs?

Accepted Answer

Russia has a comparative advantage in making automobiles; it costs Russia 5 tons of steel to make an automobile,and it costs India 6 tons of steel to make an automobile.Russia makes automobiles more efficiently than it makes steel,and the countries will trade as long as the price of automobiles is higher than 5 tons of steel (otherwise Russia will not sell)and lower than 6 tons of steel (otherwise India will not buy).

Question 9

A product is invented in Country X and is first manufactured there.The International Product Life Cycle Theory holds that the product will be manufactured in developing countries within a couple of years.

Accepted Answer

The International Product Life Cycle Theory suggests that a product is initially produced in the country where it was invented. Over time, as the product matures and becomes standardized, production may shift to developing countries to take advantage of lower labor costs, but this process typically takes longer than "a couple of years" and depends on various factors such as the complexity of the product, intellectual property rights, and the ability of developing countries to meet production standards.

Question 10

International trade is still mostly concentrated among the developed countries of the Northern Hemisphere.Which country is the largest importer of the world?

Accepted Answer

The United States is the largest importer in the world,and imports about twice what Germany imports and more than twice what China imports.

Question 11

A firm can respond to one of its competitors' introduction of a lower-priced product by starting to produce its own lower-cost product abroad and importing it.Such a strategy is called

Accepted Answer

Outsourcing is the process of manufacturing abroad in order to lower production costs.

Question 12

The Heckscher-Ohlin Theory holds that countries that have an abundance of certain resources enjoy an absolute or comparative advantage over other countries.Which of the following is NOT one of the factors that Heckscher and Ohlin considers scarce?

Accepted Answer

The four resources that economists consider scarce are "land,labor,capital,and entrepreneurship." Depending on the background of the students in economics,this can be an easy question or a difficult one.

Question 13

Which of the following entities was created at the Bretton Woods Conference of 1944?

Accepted Answer

The IMF was created at the Bretton Woods Conference.

Question 14

Porter's Cluster Theory holds that geographical areas with a large concentration of a certain type of companies allow that area to obtain an absolute or comparative advantage.How do those companies benefit from the presence of other companies like them in the same area?

Accepted Answer

All of these options are explicitly listed in the "cluster theory" section.

Question 15

Consumer mobility refers to the idea that consumers like to find the same products everywhere.An example of a company that sells products everywhere in the world because its customers are all over the world is

Accepted Answer

These three companies operate in the industries that are specifically listed in Section 1-4c as having "followed" their consumers worldwide.

Question 16

Michael Porter views Silicon Valley is an example of a "cluster" of innovation and manufacturing.

Accepted Answer

Michael Porter, a leading economist and management strategist, identified Silicon Valley as an example of a successful "cluster," which is a geographic concentration of interconnected companies, specialized suppliers, and supporting institutions in a particular field. This concentrated ecosystem fosters innovation and facilitates collaboration, leading to increased productivity and competitiveness within the industry.

Question 17

The common currency of most of the countries of the European Union is called

Accepted Answer

The euro is the currency created in 1999 and placed in circulation in 2002.The term "euro-dollar" refers to U.S.dollars kept in accounts in [foreign] banks not subject to the authority of the Federal Reserve Banks,and the ECU is the original name proposed for the euro and eventually abandoned.Thaler is an old European currency.

Question 18

Until the 1950s,most of the area rugs in the world were manufactured in Persia (Iran)and Pakistan.Artisans in these countries had developed techniques (dyes and knots)that were unique and that other production areas were not capable of reproducing.These areas enjoyed what Michael Porter would call an "absolute advantage."

Accepted Answer

Michael Porter's concept of "absolute advantage" is actually not his; it's a term from classical economics, primarily associated with Adam Smith, referring to the ability of a country to produce a good more efficiently than other countries. Porter is known for his theories on competitive advantage and the value chain.

Question 19

The European Union is an economic community that comprises how many countries?

Accepted Answer

The European Union has had 27 members since 2009.

Question 20

Russia can produce 25 tons of steel or 5 automobiles using the same amount of resources.Using the exact same amount of resources,India can produce 18 tons of steel and 3 automobiles.According to the theory of comparative advantage,the countries will trade with each other.What will Russia produce?

Accepted Answer