International Business Ch. 6

The Middle East has an abundance of oil reserves. These oil reserves are an example of a factor endowment; therefore, exporting oil supports the _____ theory

Heckscher-Ohlin

What is the theory that states that countries will export goods that make intensive use of factor endowments that are abundant in the economy

Heckscher-Ohlin

According to the Heckscher-Ohlin theory, it is expected that the US would export capital-intensive goods and import labor-intensive goods, but the opposite was found to be true. This became know as the...

Leontief paradox

Mercantilism promoted the idea that trade was a zero-sum game which means that

a gain by one country results in a loss by another

Adam Smith and David Ricardo pointed out limitations in mercantilism when they advocated that trade was a positive-sum game which means that

all countries benefit

What are the types of factors of production identified by Porter

basic and advanced

The eventual consequence of the product life cycle theory is that the country where production of an item begins

becomes an importer of the product

Heckscher and Ohlin identified differences in national factor endowments as the root of

comparative advantage

Which form of returns to specialization means that the units of resources required to product one unit are assumed to remain the same no matter where a country is on the production possibility frontier

constant

Porter states that firms are typically most sensitive to the needs of their closet customers. he called this _______ conditions

demand

Which two of these attributes did Porter believe are MOST significant for competitive advantage?

demand conditions and factor endowments

Which three factors did Michael Porter point to in his explanation of why some nations achieve international success in particular industries

domestic rivalry, domestic demand, and factor endowments

An assembly line in a candy factory is an example of _____ because it allows the candy company to benefit from cost reductions based on the vast amount of candy produced

economies of scale

The cost advantage that comes from increased output of a product is known as....

economies of scale

A new trade theorist would say that a company should rely on which of the following to gain first-mover advantage

entrepreneurship, innovation, and luck

When considering free trade opportunities in Mexico, with access to cheap labor and diverse plant life, it makes sense for Mexico to _______ agricultural goods

export

According to new trade theory, the dominance of the US in the commercial jet aircraft industry is related to _____-mover advantages

first

Carl's company was able to gain economic advantage over all of its competition when it premiered the digital camera into South America before them. This is an example of a _________

first-mover advantage

Preempting demand, gaining volume cost advantages, building the brand, and establishing a long-term competitive advantage are associated with

first-mover advantages

______ is the opposite of economic isolationism

free trade

According to mercantilism, ______ were the mainstays of national wealth and were essential to business actitivy

gold and silver

Besides the four broad attributes of a nation that shape the environment in which local firms compete, what two add't variable did Porter discuss that can influence the national diamond

government and chance events

To shift a country's production possibility frontier outward, which two of the following should take place

increase the efficiency with which resources are used and increase the stock of the country's resources

According to Heckscher and Ohlin, each country has certain factor endowments. What are two examples of these?

labor and land

Rich country A enters into a free trade agreement with poor country B. Poor country B improves its productivity. Rich country A pays lower prices for good imported from poor country B. However, Samuelson expresses concern that these lower prices may not offset possible ______ in rich country A

lower real wage rates

_______is a theory of trade that advocates that a country should export more than it imports which would results in the accumulation of gold and silver and increased national wealth and power

mercantilism

__________ is a theory of trade that advocates that a country should export more than it imports which would result in the accumulation of gold and silver and increased national wealth and power

mercantillism

What does Porter label as basic factors of production?

natural resources and climate

Some countries specialize in manufacturing a particular product (such as cars) for which the global market can only support a limited number of firms. This reflects which theory of international trade

new trade

Which trade theory explains why countries are trade partners when they are trading similar goods and services

new trade

_____ ______ theory states that, because of economies of scale, trade can increase the variety of goods available and decrease the average cost of these goods

new trade

What did Paul Samuelson point to as his biggest concern with free trade and its possible affects on middle-class wages in the US

offshoring of jobs as the result of communication technology

The ethnocentric view that most new products are developed and introduced in the US is a key weakness in the ______ theory

product life-cycle

Which theory was based on the observation that early in the development of a commodity, all the parts and labor come from the area in which it was invented

product life-cycle

What are two reasons for assuming diminishing returns to specialization

production might draw on marginal resources whose productivity is less than resources initially used and different goods use resources in different proportions

What are two reasons for assuming diminishing returns to specialization

production might draw on marginal resources whose productivity is less than resources initially used and different goods use resources in different proprtions

According to Porter, when _____ and _______ industries invest in advanced factors of production, it can help an industry achieve a global competitive advantage

related and supporting

What are two examples of advanced factors of production as identified by Porter

research facilities and skilled labor

What are three sources of economies of scale?

spreading fixed costs over a larger volume, the ability of large-volume producers to use more specialized equipment, and the ability of large-volume producers to use more effective, specialized employees

The main criticism of mercantilism was that

the goal of a constant positive balance of trade if impossible

According to David Ricardo's theory of comparative advantage, a country should focus on ____

the production of goods it produces most effciently

True or false: new trade theory is very useful in explaining trade patterns

true