Macroeconomics Review- International Trade

The focus of factor proportions theory is on the ________. A) productivity of the production process B) cost-effectiveness of the production process C) use of depleting production factors D) use of expensive production factors

A

Wallace expects that markets abroad will soon become fully aware of the existence of the product and its benefits. Which of the following life cycle stages will the product be a part of during that period? A) maturing product stage B) product decline stage C) standardized product stage D) new product stage

A

When there are gains to be had by both countries that are party to an exchange, international trade is considered a(n) ________. A) positive-sum game B) equal-sum game C) negative-sum game D) zero-sum game

A

Which of the following is an assumption made by the comparative advantage theory? A) maximization of production and consumption B) government interference and control in trade activities C) creation of trade deficits D) creation of trade surpluses

A

According to the Porter diamond, which of the following is an example of an advanced factor? A) labor forces in the nation B) technological infrastructure in the nation C) climate in the nation D) natural resources in the nation

B

Country A produces a ton of coffee using one unit of resources. Country B produces two tons of coffee using one unit of resources. Which of the following is true regarding Country A and Country B? A) Country A has an absolute advantage in producing coffee. B) Country B has an absolute advantage in producing coffee. C) Neither Country A nor Country B has an absolute advantage in producing coffee. D) Both Country A and Country B have an absolute advantage in producing coffee.

B

National competitive advantage theory states that a nation's competitiveness in an industry depends on ________. A) the capacity of companies to create barriers to entry B) the capacity of the industry to innovate and upgrade C) the availability of government subsidies for industry development D) the availability of cheap factors of production in the nation

B

The Leontief paradox describes evidence ________. A) in support of the predictions of the mercantilist theory B) contrary to the predictions of the factor proportions theory C) that the assumptions of international product life cycle theory are invalid D) that the assumptions of the new trade theory are invalid

B

The danger of trade dependency is that ________. A) it often leads to the exploitation of developed countries B) political turmoils in a country might affect all dependent countries C) the countries involved in trade often get into rivalry over trade tariff issues D) it is difficult to end trade activities with current trade partners and find new trade partners

B

The smallest portion of the total world trade comprises trade between ________. A) high-income and middle-income nations B) low-income and middle-income nations C) developed countries D) First World member countries

B

Which element of national competitive advantage theory divides resources into two groups: basic and advanced? A) demand conditions B) factor conditions C) related and supporting industries D) firm, strategy, structure, and rivalry

B

Another term for neomercantilism is ________. A) new trade B) free trade C) economic nationalism D) political nationalism

C

During which stage of the international product life cycle theory does demand rise and remain sustained for a fairly lengthy period of time? A) product decline stage B) new product stage C) maturing product stage D) standardized product stage

C

Most of the world merchandise trade is composed of trade in ________. A) minerals B) services C) manufactured goods D) agricultural products

C

Much production in the world today closely resembles what is predicted by the ________. A) new trade theory B) international product life cycle C) theory of comparative advantage D) theory of factor proportions

C

Nations following the theory of ________ believed that the world's wealthwas limited and that a nation could increase its share of the pie only at the expense of its neighbors. A) absolute advantage B) comparative advantage C) mercantilism D) factor proportions

C

The ________ theory states that a country's export eventually becomes its import. A) competitive advantage B) factor proportions C) international product life cycle D) new trade

C

The international product life cycle theory was put forth for ________. (developed by Raymond Vernon) A) service goods B) abundant resources C) manufactured goods D) natural resources

C

Which of the following refers to the ability of a nation to produce a good more efficiently than any other nation? (produced by Adam Smith) A) mercantilism B) comparative advantage C) absolute advantage D) neomercantilism

C

Which of the following statements is true regarding the assumptions of the absolute and comparative advantage theories? A) The theories assume that there are many number of countries engaged in the production and consumption of just two goods. B) The theories assume that there are additional costs for transporting traded goods from one country to another. C) The theories assume labor to be the only resource used in the production process. D) The theories assume that specialization in the production of one particular good results in gains in efficiency.

C

Eventually, Wallace expects that domestic production of the mousetrap will cease altogether. This would happen in the ________ stage of the product life cycle. A) new product B) maturing product C) adapted product D) standardized product

D

In the ________ of the international product life cycle, competition from other companies selling similar products pressures companies to lower prices in order to maintain sales levels. A) product decline stage B) new product stage C) maturing product stage D) standardized product stage

D

The ________ theory states that countries produce and export goods that require resources available in abundance and import goods that require resources in short supply. (produced by Heckscher and Ohlin) A) new trade B) absolute advantage C) international product life cycle D) factor proportions

D

The importance of trade for a nation can be measured by ________. A) examining the amount of wealth acquired by the national government through restrictive trade policies B) the living standards of people involved in only trade activities C) the number of acquired territories the nation has that serves as sources of inexpensive raw materials D) examining the volume of its trade relative to its total output

D

The new trade theory is mainly at odds with the ________ theory. A) international product life cycle B) comparative advantage C) national competitive advantage D) factor proportions

D

The theory of absolute advantage measures a nation's wealth by determining the ________. A) amount of gold it has on reserve B) quantity of minerals it has on reserve C) total trade volume in the country D) living standards of its people

D

T or F: The value of trade passing through the borders of all countries exceeds the amount of goods and services they produce.

False

T or F: Factor proportions theory states that a country will produce and export those goods that require resources abundantly available within the country.

True

T or F: The theories of comparative advantage and absolute advantage assume that countries are driven only by the maximization of production and consumption.

True

T or F: The theory of absolute advantage destroys the mercantilist idea that international trade is a zero-sum game.

True

T or F: The theory of absolute advantage measures a nation's wealth by the standard of living of its people.

True

Wallace's executive team reviews the stages of the international product life cycle to understand better what to expect when the product is sold overseas. Since there is virtually no export market for the product at present, the product is most likely in which of the following stages of the international product life cycle? A) maturing product stage B) new product stage C) product decline stage D) standardized product stage

B

Which of the following is an argument offered by the new trade theory? A) It is in line with the factor proportions theory. B) There are gains to be made from specialization and increasing economies of scale. C) The companies first to market forgo the opportunities to create barriers to entry. D) Market forces alone play a role in assisting the home companies in a country.

B

________ says that nations should accumulate financial wealth, usually in the form of gold, by encouraging exports and discouraging imports. A) Absolute advantage theory B) Factor proportions theory C) Mercantilism D) Communism

C

One of the major pillars upon which the practice of mercantilism rested was ________. A) economies of scale B) pricing mechanism C) excessive imports D) trade surpluses

D

When a country is not able to produce a good more efficiently than other nations, but produces the good more efficiently than it does any other good, it is said to have a(n) ________. (produced by David Ricardo) A) absolute advantage B) resource advantage C) first-mover advantage D) comparative advantage

D

T or F: International trade is the purchase, sale, or exchange of goods and services across national borders.

True

T or F: Mercantilism states that nations should only concern themselves with accumulating financial wealth.

True