Question 1

Which theory asserts that countries should simultaneously encourage exports and discourage imports?

Accepted Answer

A)   free trade
B)   capitalism
C)   new trade
D)   mercantilism
E)   socialismF) C) and E)
G) A) and E)

Question 2

Identify and briefly describe the four broad attributes that constitute Porter's diamond.

Accepted Answer

Porter theorizes that four broad attribu...

Question 3

From the perspective of making a profit, it is sensible for a company to disperse production activities to countries where they can be performed most efficiently.

Accepted Answer

A) True 
 B)False

Question 4

According to the product life-cycle theory, the locus of global production initially switches from the United States to other advanced nations and then from those nations to developing countries. As a result,

Accepted Answer

A)   U.S. imports become less capital-intensive than U.S. exports.
B)   the pattern of international trade is affected by differences in factor endowments rather than differences in productivity.
C)   over time, the United States switches from being an exporter of a product to an importer of the product.
D)   the wage rates in the United States decrease.
E)   developing nations fail to upgrade their skill levels to compete with advanced countries.F) C) and D)
G) A) and E)

Question 5

An inconsistency in the mercantilist doctrine, as pointed out by David Hume, is that

Accepted Answer

A)   the volume of a country's imports increases as an indirect consequence of mercantilism.
B)   the exclusion of government influence in matters pertaining to trade is not ideal.
C)   in the long run, no country could sustain a surplus on the balance of trade.
D)   it was not backed by either sound political principles or social ideologies.
E)   trade is a zero-sum game rather than a positive-sum game as postulated by the theory.F) D) and E)
G) A) and B)

Question 6

According to the Smith, Ricardo, and Heckscher-Ohlin theories, a country's economy may gain if its citizens buy some products from other nations that could be produced in their home nation. What is the reasoning behind this idea?

Accepted Answer

A)   The natural resources of a country limit the types and quantities of items that can be produced.
B)   International trade is typically regulated by government forces that prevent a business from exporting.
C)   International trade allows a country to specialize in items that can be produced most efficiently in that country.
D)   First-mover advantages limit a country from producing every product that citizens need or want.
E)   Innovative products are typically produced in the home country, but high-demand products should be imported.F) A) and B)
G) C) and D)

Question 7

From a profit perspective based on the various international theories, how would a business go about choosing locations for its various productive activities?

Accepted Answer

From a profit perspective, it makes sens...

Question 8

Porter believed that two additional variables can influence the national diamond along with the four original attributes. What are those two additional variables?

Accepted Answer

A)   education and geography
B)   nature and nurture
C)   competition and globalization
D)   chance and government
E)   geography and historyF) C) and D)
G) A) and E)

Question 9

As a trade theory, mercantilism was based on the idea that a trade surplus would lead to

Accepted Answer

A)   absolute advantage among all trading partners.
B)   first-mover advantages.
C)   lower levels of inflation and a steady economy.
D)   accumulations of gold and silver.
E)   lower levels of national wealth.F) C) and D)
G) All of the above

Question 10

How does Porter's theory predict patterns in international trade? Do his predictions turn out to be accurate in a real-world scenario?

Accepted Answer

According to Porter's model of internati...

Question 11

Discuss how Adam Smith and David Ricardo turned the conversation and demonstrated that trade is a positive-sum game. How has the neo-mercantilist approach viewed trade?

Accepted Answer

Mercantilism viewed trade as a zero-sum ...

Question 12

According to Adam Smith, government policy should determine a country's imports and exports.

Accepted Answer

A) True 
 B)False

Question 13

Bethany works for a company that makes sports socks. Unlike many smaller companies, Bethany's company ships out such large quantities of sports socks that their unit cost is less than half of the competition. What does this company benefit from?

Accepted Answer

A)   mercantilism
B)   diminishing returns
C)   economies of scale
D)   product life-cycle
E)   JIT inventoryF) A) and D)
G) A) and C)

Question 14

What was the principle currency of trade in the mid-sixteenth century when mercantilism came into favor in England?

Accepted Answer

A)   the pound
B)   gold and silver
C)   the U.S. dollar
D)   salt and spices
E)   human laborF) A) and C)
G) A) and B)

Question 15

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?

Accepted Answer

A)   Product-life cycle
B)   Absolute advantage
C)   New trade theory
D)   Mercantilism
E)   Comparative advantageF) D) and E)
G) A) and C)

Question 16

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

Accepted Answer

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 productF) None of the above
G) A) and B)

Question 17

When the country of Matu trades with the country of Balor, Matu experiences a gain because of the high costs of its products while Balor experiences a loss because it is trading small amounts of products that cost very little. Which characteristic of the mercantilist theory does this reflect?

Accepted Answer

A)   factor endowments
B)   first-mover advantage
C)   zero-sum game
D)   late-mover advantage
E)   comparative advantageF) C) and E)
G) None of the above

Question 18

According to the Heckscher-Ohlin theory, the pattern of international trade is determined by differences in

Accepted Answer

A)   labor productivity.
B)   diminishing returns.
C)   factor endowments.
D)   management practices.
E)   trade barriers.F) C) and D)
G) A) and E)

Question 19

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

Accepted Answer

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.F) B) and C)
G) A) and E)

Question 20

What is meant by the term free trade? Is free trade compatible with the concept of mercantilism?

Accepted Answer

Free trade refers to the absence of gove...

Exam 6: International Trade Theory

According to the Smith, Ricardo, and Heckscher-Ohlin theories, a country's economy may gain if its citizens buy some products from other nations that could be produced in their home nation. What is the reasoning behind this idea?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

According to the product life-cycle theory, the locus of global production initially switches from the United States to other advanced nations and then from those nations to developing countries. As a result,

Correct AnswerverifiedShow Answer

How does Porter's theory predict patterns in international trade? Do his predictions turn out to be accurate in a real-world scenario?

Correct AnswerverifiedAccording to Porter's model of internati...View AnswerShow Answer

What is meant by the term free trade? Is free trade compatible with the concept of mercantilism?

Correct AnswerverifiedFree trade refers to the absence of gove...View AnswerShow Answer

What was the principle currency of trade in the mid-sixteenth century when mercantilism came into favor in England?

Correct AnswerverifiedShow Answer

From a profit perspective based on the various international theories, how would a business go about choosing locations for its various productive activities?

Correct AnswerverifiedFrom a profit perspective, it makes sens...View AnswerShow Answer

An inconsistency in the mercantilist doctrine, as pointed out by David Hume, is that

Correct AnswerverifiedShow Answer

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?

Correct AnswerverifiedShow Answer

When the country of Matu trades with the country of Balor, Matu experiences a gain because of the high costs of its products while Balor experiences a loss because it is trading small amounts of products that cost very little. Which characteristic of the mercantilist theory does this reflect?

Correct AnswerverifiedShow Answer

According to Adam Smith, government policy should determine a country's imports and exports.

Correct AnswerverifiedShow Answer

Identify and briefly describe the four broad attributes that constitute Porter's diamond.

Correct AnswerverifiedPorter theorizes that four broad attribu...View AnswerShow Answer

From the perspective of making a profit, it is sensible for a company to disperse production activities to countries where they can be performed most efficiently.

Correct AnswerverifiedShow Answer

As a trade theory, mercantilism was based on the idea that a trade surplus would lead to

Correct AnswerverifiedShow Answer

Porter believed that two additional variables can influence the national diamond along with the four original attributes. What are those two additional variables?

Correct AnswerverifiedShow Answer

According to the Heckscher-Ohlin theory, the pattern of international trade is determined by differences in

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Discuss how Adam Smith and David Ricardo turned the conversation and demonstrated that trade is a positive-sum game. How has the neo-mercantilist approach viewed trade?

Correct AnswerverifiedMercantilism viewed trade as a zero-sum ...View AnswerShow Answer

Which theory asserts that countries should simultaneously encourage exports and discourage imports?

Correct AnswerverifiedShow Answer

Bethany works for a company that makes sports socks. Unlike many smaller companies, Bethany's company ships out such large quantities of sports socks that their unit cost is less than half of the competition. What does this company benefit from?

Correct AnswerverifiedShow Answer

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According to Porter's model of internati...
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Free trade refers to the absence of gove...
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From a profit perspective, it makes sens...
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Correct Answer
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Porter theorizes that four broad attribu...
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Mercantilism viewed trade as a zero-sum ...
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