Exam 2

A country that relies on the pragmatic nationalist view would say that

FDI should be allowed so long as the benefits outweigh the costs

The economic and strategic advantages that accrue to early entrants into an industry are called

First-mover advantages

Brianna lives in a nation that encourages the production of goods for exporting and to satisfy the needs of the nation's citizens. This results in the nation relying less on importing goods. Which trade theory does this reflect?

Mercantilism

Custom Cabinetry International needs immediate access to wood in order to produce an order of 50,000 high-end retail display cases by the end of next year. It cannot afford to wait and establish a new operation in a foreign country where this species of wood is prevalent, so it decides to purchase an existing company instead. Why did Custom Cabinetry decide to make this purchase?

Mergers and acquisitions are quicker to execute than greenfield investments.

The U.S. agriculture industry has long-benefited from high tariff rates and _____ that protect domestic agriculture and traditional farming communities.

Subsidies

A European nation has the world's most efficient computer monitor manufacturing industry, while a country in Central America has the world's most efficient agricultural machines industry. The European nation trades computer monitors with the Central American country in exchange for agricultural machinery. This form of trade between the two countries illustrates

The theory of absolute advantage

The basic message of the __________ is that potential world production is greater with unrestricted free trade than it is with restricted trade.

Theory of comparative advantage

A tariff rate quota provides a lower tariff rate to

imports within the quota.

An implication of trade barriers for business practice is that they

limit a firm's ability to serve a country from locations outside of that country.

Subsidies and quotas are examples of __________ barriers a county might impose.

nontariff

The Heckscher-Ohlin theory is based on the idea that

the pattern of international trade is determined by differences in factor endowments.

Licensing is a good option to enter a foreign market when

tight control of the foreign operation is not required.

Foreign producers agree to __________ imposed by an exporting country because they fear more damaging punitive tariffs or import quotas might follow if they do not.

voluntary export restraints

A South American nation has a direct restriction on the amount of vegetables that may be imported into the country. Which instrument of trade policy does this reflect?

Import quota

One example of a(n) __________ effect of foreign direct investment is when jobs are created because of increased local spending by employees of an MNE.

Indirect

The __________ argument was proposed by Alexander Hamilton in 1792 and is by far the oldest economic argument for government intervention.

Infant industry

Solar Chemical, an industrial cleaning products manufacturing company, has a market share of 30 percent in Brazil. Three of its competitors together control 55 percent of the market. Whenever Solar Chemical raises or lowers the prices of its products, the other three companies quickly imitate its action. What is the market structure of this industry in Brazil?

Oligopoly

One focus of strategic trade policy is to help domestic companies gain

a first-mover advantage.

According to the eclectic paradigm, __________ is/are of considerable importance in explaining both the rationale for and the direction of foreign direct investment.

location-specific advantages

The mercantilist doctrine promoted government intervention in order to achieve

A surplus in the balance of trade

One form of FDI is __________, which involves the establishment of a new operation in a foreign country.

A greenfield investment

Aesha works for a moderately priced running shoe manufacturer and while their products are lower in cost, there is a high degree of consumer pressure to create the best quality running shoes possible and to constantly innovate with new designs. Which aspect of Porter's Diamond does this demonstrate?

Demand conditions

Fast Tracker Inc., a U.S.-based company, makes custom wearable fitness trackers in Oregon, which are then shipped to Europe for sale there. Based on this information, Fast Tracker Inc. is involved in

Exporting

Tavis lives in southern Florida where there is sufficient land and labor to successfully grow gourds and melons. Heckscher-Ohlin would consider the land and labor to be

Factor endowments

Raymond Vernon noticed that in the 1960s, the wealth and size of the U.S. market was a natural incentive to develop new consumer products. What theory did he propose based on this fact?

Product life -cycle

Which political ideology reflects the idea that a multinational enterprise is an instrument of imperialist domination?

Radical view

A tax of 14 cents is levied for each ceramic plate imported into a nation. This is an example of a(n

Specific tariff

In his theory of absolute advantage, Adam Smith advocated that __________ should determine what a country imports and what it exports.

The market mechanism

A country that imports more goods than it exports experiences a

Trade deficit

Paul Krugman characterizes strategic trade policy as being

a boost to national income at the expense of other countries.