Ch.2 - GB

More than one-half of the exports from developing countries go to __________ countries, and this proportion has been _____________ over the past 35 years. A. developed; increasing B. developing; increasing C. developed; decreasing D. developing; decreasing E. none of the above

C. developed; decreasing

Economies of scale and the experience curve: A. explain how international trade in manufactured goods will be linked to gross national income. B. state that a nation will trade goods that can be produced with the production factor that is most abundant. C. explain why many companies will engage in international trade. D. two of the above. E. none of A, B, or C.

C. explain why many companies will engage in international trade.

National Comparative Advantage through Regional Clusters

1. A large pool of qualified labor 2. Local suppliers with skills and knowledge 3. Innovation Hub (ex: Hollywood, movie capital)

International Product Life Cycle

1. Domestic Production and Scale 2. Export 3. Foreign Production and sale (competition) 4. Foreign competition in exports 5. Imports

Which of the following is explained by international trade theory? A. Differences in production costs B. Differences in levels of technology C. Foreign exchange rates D. Differences in efficiency of factor use E. All of the above

E. All of the above

Who is trading with whom?

-Trade agreements(governments) Taxes(tariffs) -Developing countries(because its cheaper) compete on cost(it can improve the country)

The three largest markets for American exports of goods in 2010 were: A. Japan, the UK, and China. B. Japan, Mexico, and the UK. C. Canada, Mexico, and China. D. Canada, Japan, and the UK. E. Japan, Mexico, and China.

C. Canada, Mexico, and China.

Mercantilists believed that: A. merchants should import goods to raise the level of living. B. governments should lower import duties. C. a nation should have an export surplus in order to accumulate precious metals. D. a nation should produce goods for which there is a comparative advantage. E. two of the above.

C. a nation should have an export surplus in order to accumulate precious metals.

When considering where to export, advantages to managers of focusing on a nation that is already a sizable purchaser of goods coming from the home country include: A. the political climate in the importing nation is relatively stable. B. there are abundant natural resources in the importing nation. C. satisfactory transportation facilities have already been established. D. all of the above. E. two of A, B, and C.

C. satisfactory transportation facilities have already been established.

To sum up international trade theory, we can say that the primary reason for trade is: A. the increase in OPEC oil prices. B. governments want to accumulate money. C. the existence of price differentials among nations. D. the creation of new nations from former colonies. E. none of the above.

C. the existence of price differentials among nations

Economies of Scale and Experiences Curves

-make something cheaper by producing more new markets=growth/lower costs pick up on experiences

International Trade Theories

1. Mercantilism 2. Theory of Absolute Advantage 3. Theory of Comparative Advantage 4. Differences in Resource Endowments 5. Overlapping demand 6. International Product Life Cycle 7. Economies of scale & Experience curves 8. National Comparative Advantage through Regional Clusters

When considering where to export, advantages to managers of focusing on a nation that is already a sizable purchaser of goods coming from the home country include: A. the cultures of the two countries should be relatively similar and compatible. B. the climate for foreign direct investment in the importing nation is relatively favorable. C. export and import regulations are not insurmountable. D. all of the above. E. two of A, B, and C.

C. export and import regulations are not insurmountable.

The international product life cycle: A. explains how international trade in manufactured goods will be linked to gross national income. B. states that a nation will trade goods that can be produced with the production factor that is most abundant. C. is concerned with the role of innovation in trade patterns. D. two of the above. E. none of A, B, or C.

C. is concerned with the role of innovation in trade patterns.

Adam Smith claimed that: A. governments, not market forces, should determine the directions, volume, and composition of international trade. B. a nation could trade advantageously if it had a comparative advantage. C. market forces, not government controls, should determine direction, volume, and the composition of international trade. D. customers' tastes are affected by income levels. E. two of the above.

C. market forces, not government controls, should determine direction, volume, and the composition of international trade.

Regarding annual inflows of FDI: A. industrialized nations primarily invest in one another. B. an average of nearly 70 percent of annual FDI investments has been going into developed countries in recent years. C. developed countries obtained a 70 percent increase in the level of FDI between 2000 and 2009. D. all of the above. E. two of A, B, and C.

E. two of A, B, and C.

Mercantilism

Exports(make money) Imports(spend money) an economic philosophy based on the belief that a nation's wealth depends on accumulated treasure, usually precious metals such as gold and silver, and to increase wealth, government policies should promote exports and discourage imports

Differences in resource endowments

trade between countries

overlapping demand

people from similar countries will have similar tastes

A nation having absolute disadvantages in the production of two goods with respect to another nation has ___________ in the production of the good in which its absolute disadvantage is less. A. a comparative advantage B. an absolute advantage C. a mercantilist advantage D. none of the above E. two of A, B, and C

A. a comparative advantage

Porter's Diamond Model of national advantage: A. claims that the ability of local firms in a country to utilize the country's resources to gain a competitive advantage is based on demand conditions, factor conditions, substitute products, and firm strategy, structure, and rivalry. B. links intraindustry trade to relative levels of per capita income. C. is not affected by chance. D. all of A, B, and C. E. two of A, B, and C.

A. claims that the ability of local firms in a country to utilize the country's resources to gain a competitive advantage is based on demand conditions, factor conditions, substitute products, and firm strategy, structure, and rivalry.

Offshoring is an application of: A. comparative advantage. B. differences in taste. C. money market rates. D. exchange rate theory. E. none of the above.

A. comparative advantage.

The monopolistic advantage theory suggests that firms in oligopolistic industries are likely to _______________ foreign direct investment when they have technical and other advantages over indigenous firms. A. increase B. reduce C. ignore D. not change E. none of the above

A. increase

In examining the volume of international trade: A. the proportion of manufacturing value added generated by South and East Asia has quadrupled since 1980. B. the proportion of manufacturing value added generated by Latin America has doubled since 1980. C. the proportion of world exports and imports accounted for by the 10 largest exporting and importing nations exceeded 70 percent in 2010. D. all of the above. E. two of A, B, and C.

A. the proportion of manufacturing value added generated by South and East Asia has quadrupled since 1980.

According to trade theory: A. traders need to know the exchange rate between their own currency and that of the nation they are considering trading with before they can decide whether it is advantageous to import, export, or buy locally. B. if a currency's exchange rate strengthens, then its exporters will no longer be able to profitably export their products. C. devaluation of a currency will automatically cause a nation's products to be price-competitive in international markets. D. all of the above. E. two of A, B, and C.

A. traders need to know the exchange rate between their own currency and that of the nation they are considering trading with before they can decide whether it is advantageous to import, export, or buy locally.

Supporters of mercantilism: A. viewed accumulation of precious metals as an activity essential to a nation's welfare. B. viewed industrial development as the primary source of a nation's wealth. C. promoted trade policies that generally benefited consumers and emerging industrialists. D. all of the above. E. two of A, B, and C.

A. viewed accumulation of precious metals as an activity essential to a nation's welfare.

The monopolistic advantage theory states that: A. a firm that has a monopoly has a major advantage in overseas investment. B. FDI is made by firms in oligopolistic industries possessing technical advantages over local companies. C. a firm that has a monopoly domestically will have no competition making overseas investments. D. the firm making the overseas investment first has a monopolistic advantage. E. none of the above.

B. FDI is made by firms in oligopolistic industries possessing technical advantages over local companies.

_______________ occurs primarily because of relative price differentials among nations. A. Foreign direct investment B. International trade C. Portfolio investment D. All of the above E. Two of A, B, and C

B. International trade

The capability of one nation to produce more of a good with the same amount of input than another country is: A. a comparative advantage B. an absolute advantage C. a mercantilist advantage D. none of the above E. two of A, B, and C

B. an absolute advantage

Locating activities in another nation is: A. outsourcing. B. offshoring. C. foreign direct investment. D. all of the above. E. two of A, B, and C.

B. offshoring.

The theory of resource endowment: A. explains why France exports cosmetics, wine, commercial aircraft, and clothing. B. states that a nation will trade goods that can be produced with the production factor that is most abundant. C. explains why an automobile can be made either by hand or by a capital-intensive process. D. explains why transportation costs may be ignored when calculating the costs of imports. E. none of the above.

B. states that a nation will trade goods that can be produced with the production factor that is most abundant.

Firms from __________ had the largest total outstanding stock of direct overseas investment at the beginning of 2010. A. Germany B. the United States C. the United Kingdom D. Japan E. China

B. the United States

Regarding the annual outflows of foreign direct investment: A. the overall volume that came from developing nations in 2009 was nearly five times the level from those nations in 1990. B. the proportion that came from the United States and Europe was nearly 50 percent in 2009. C. much of the recent increase has been associated with mergers, acquisitions, and other international investments made by companies in industries facing increased competition and global consolidation. D. nearly half went to China and its territories from 2007 to 2009. E. all of the above.

C. much of the recent increase has been associated with mergers, acquisitions, and other international investments made by companies in industries facing increased competition and global consolidation.

If Ecuador has an absolute advantage in coffee and Argentina in wheat, then, according to trade theory: A. Ecuador should focus production on coffee and trade for wheat. B. Ecuador would do well to produce its own coffee rather than import it from Bolivia. C. Argentina should focus on producing wheat and trade for coffee. D. all of the above. E. two of A, B, and C.

D. all of the above.

Many of the Asian countries that are major exporters to the United States are also significant importers of American goods because: A. their rising standards of living enable their people to afford more imported products. B. they are purchasing large amounts of capital goods to further their industrial expansion. C. they are importing raw materials and components that will be assembled and subsequently be exported, often to the United States. D. all of the above. E. two of A, B, and C.

D. all of the above.

Theory based on ____________________ states that international and interregional differences in production costs occur because of differences in the supply of production factors. A. comparative advantage B. absolute advantage C. mercantilist advantage D. resource endowments E. none of the above

D. resource endowments

The three nations that exported the largest amount of goods to the United States in 2010 were: A. Japan, Canada, and China. B. China, Mexico, and the UK. C. Japan, China, and Saudi Arabia. D. Canada, Japan, and Mexico. E. Canada, Mexico, and China.

E. Canada, Mexico, and China.

Which of the following elements are included in Porter's Diamond Model of national advantage? A. Competitive conditions B. Export conditions C. Social conditions D. Supply conditions E. None of the above

E. None of the above

Regarding foreign direct investment and trade: A. historically, foreign trade has followed foreign direct investment. B. foreign trade is typically more costly and more risky than making a direct investment into foreign markets. C. typically, a firm would hire sales representatives to live in overseas markets as a first step in developing international trade. D. fewer government barriers to trade, increased competition from globalizing firms, and new production and communications technology are causing many international firms to disperse the activities of their production systems to locations close to available resources. E. all of the above.

E. all of the above.

Regarding economic and social development: A. international trade has an important role in influencing nations' economic and social performance, with this role being even more fundamental in the case of developed countries. B. expansion of trade guarantees improvement for a country and its people. C. the Trade and Development Index attempts to provide a quantitative indication of a nation's social and economic development. D. the 30 highest-ranked nations in the initial Trade and Development Index were all developed countries. E. for the Trade and Development Index, the best regional performance among developing countries was that of the countries of the East Asia and Pacific region.

E. for the Trade and Development Index, the best regional performance among developing countries was that of the countries of the East Asia and Pacific region.

Regarding foreign investment: A. it can be divided into three components: international trade, portfolio investment, and direct investment. B. portfolio investment involves investors who participate in the management of the firm in addition to receiving a return on their money. C. deals that result in the foreign investor's obtaining at least 10 percent of the shareholdings are classified as portfolio investments. D. two of A, B, and C. E. none of A, B, and C.

E. none of A, B, and C.

According to the theory of comparative advantage: A. a nation should produce those goods which it is more efficient at producing than are other nations. B. a nation can gain from trade if it is equally inefficient in producing two goods. C. a nation must have an absolute advantage in at least one good to gain from trade. D. all of the above. E. none of A, B, or C.

E. none of A, B, or C.

The theory of overlapping demand: A. explains how international trade in manufactured goods will be linked to gross national income. B. states that a nation will trade goods that can be produced with the production factor that is most abundant. C. explains why companies will add excess capacity to their production systems. D. two of the above. E. none of A, B, or C.

E. none of A, B, or C.

Dunning's eclectic theory of international production states that if a firm is going to invest in production facilities abroad, it must have the following kinds of advantages: A. ownership specific, location specific, and internationalization. B. strategic, organizational, and technological. C. political, technological, and human resource. D. technological, financial, and human resource. E. none of the above.

E. none of the above.

The rapid expansion of world exports since 1980 demonstrates that: A. businesspeople must be prepared to meet increased competition. B. domestic business cannot compete with cheap imports. C. the opportunity to increase sales by exporting is a viable growth strategy. D. all of the above. E. two of A, B and C

E. two of A, B and C

More than half of the exports from developing nations go to developed nations, and: A. this proportion has been declining over the past 35 years. B. approximately 70 percent of exports from developed economies also go to other industrialized nations. C. the proportion of world trade accounted for by members of regional trade agreements has grown to nearly 50 percent. D. all of the above. E. two of A, B, and C.

E. two of A, B, and C

The proportion of world commercial services exports accounted for by ___________ has evidenced an overall decline since 1980. A. the European Union B. Africa C. the United States D. all of the above E. two of A, B, and C

E. two of A, B, and C

In examining the volume of international trade: A. exports of merchandise grew nearly fivefold between 1990 and 2010. B. exports of services grew more than 10-fold between 1980 and 2010. C. the proportion of world exports of commercial services accounted for by the United States fell by nearly 20 percent between 1980 and 2010. D. all of the above. E. two of A, B, and C.

E. two of A, B, and C.