INB Test 2 Ch 5

According to the theory of absolute advantage, which of the following is true of a nation with free trade?

A nation gains by specializing in economic activities in which it has an absolute advantage.

According to the institution-based view, why do nations benefit from international trade?

Because different rules governing trade are designed to determine how economic gains from international trade are shared.

In the context of the product life cycle theory, which of the following statements is true of the maturing stage?

In this stage, it becomes worthwhile to produce goods in other developed nations.

In the context of the product life cycle theory, which of the following statements is true of the first stage?

In this stage, production of a new product that commands a price premium is involved.

Which of the following statements is true of trade?

It involves export and import of goods and services.

Which of the following statements is true of trade surplus?

It occurs when a nation exports goods and services more than it imports.

_____ are rules stipulating that a certain proportion of the value of the goods made in one country must originate from that country.

Local content requirements

Which of the following is a difference between merchandise trade and service trade?

Merchandise trade is the buying and selling of tangible products, whereas service trade is the buying and selling of intangible services.

_____ against free trade include national security, consumer protection, foreign policy, and environmental and social responsibility.

Political arguments

_____ is the assumption that a resource used in producing for one industry can be shifted and put to use in another industry.

Resource mobility

According to the resource-based view, which of the following is the reason for economic gains from international trade?

Some firms in a nation generate exports that are hard to imitate.

_____ are government payments to domestic firms.

Subsidies

Which of the following statements is true of administrative policies?

They are bureaucratic rules that make it harder to import foreign goods.

Which of the following statements is true of import quotas?

They are the most straightforward denial of absolute or comparative advantage.

Which of the following statements is true of non tariff barriers?

They can discourage imports by means of subsidies.

Which of the following is true of related and supporting industries within the theory of national competitive advantage of industries?

They provide the foundation upon which key industries can excel

Managers who fail to realize when a location no longer has a _____ are likely to fall behind.

comparative advantage

The theory of national competitive advantage of industries is also popularly known as the _____.

diamond theory

Plentiful labor supply in China and innovative commercialization of basic research in the United States are both examples of the_____ theory.

factor endowment

The _____ theory is also known as Heckscher-Ohlin theory.

factor endowment

A nation that is more efficient than anyone else in the production of any good or service is said to have a comparative advantage in the production of that good or service. (t/f)

false

An exporting country will never voluntarily agree to restrict its exports. (t/f)

false

Monitoring and nurturing the absolute advantage of certain locations can determine the success and failure of a firm's exports around the globe. (t/f)

false

Roc&All Inc. imports large quantities of goods into the United States and does not export much. Roc&All thus directly contributes to the U.S. trade surplus. (t/f)

false

Tariff barriers include subsidies, import quotas, export restraints, local content requirements, administrative policies, and antidumping duties. (t/f)

false

When discussing the question "why do nations trade?" We are really asking "why do governments from different nations trade?" (t/f)

false

China is able to produce wheat relatively less inefficiently than it is able to produce aircraft. By letting China specialize in the production of wheat an importing some wheat from China, the United States is able to devote its resources to aircraft. In this example, the United States is:

leveraging comparative advantage

The strategic trade theory is criticized because _____.

many industries claim that they are strategically important

The oldest and most frequently used economic argument against free trade is the urge to shield domestic industries, firms, and jobs from allegedly unfair foreign competition. This is called _____.

protectionism

A(n) _____ is a means of discouraging imports by placing a tax on imported goods.

tariff barrier

The value of imported items to Australia equals $1 trillion, but the value of exported items from Australia equals $750 billion. Australia has a $250 billion _____.

trade deficit

The value of exported items to the United Kingdom equals $1 trillion last year, but the value of items imported by the United Kingdom equals $750 billion. The United Kingdom has a $250 billion _____.

trade surplus

Nations go through the trouble of trading internationally as there must be economic gains from trade. (t/f)

true

Resource mobility is not perfect in reality, and there are many resources that cannot easily be moved from one industry to another. (t/f)

true

The Wealth of Nations by Adam Smith, published in 1776, is usually considered the foundation of modern economics. (t/f)

true

The strategic trade theory is criticized because many scholars and policy makers are uncomfortable with government intervention.

true

Trade embargoes are politically motivated trade sanctions against foreign countries to signal displeasure. (t/f)

true