MKT 310 Exam 2 SG

True or false: Quota rent refers to the tax agricultural producers must pay when excess supply is produced and must be stored by the government. True False

False

Reflecting the theories of Smith, Ricardo, and Heckscher-Ohlin, free trade permits ______, which allows a country to manufacture and export in those areas where they have a comparative advantage.

Specialization

The WTO will work hard to reduce tariffs toward zero because this will lead to substantial ______ in trade. a. Gains b. Losses

a. Gains

What were the first two industries targeted by the WTO as part of its effort to include regulations governing foreign direct investment? a. Global telecommunications b. Microchip manufacturing c. Financial services d. Auto manufacturing

a. Global telecommunications c. Financial services

Strategic trade policy suggests a(n) ______ justification for government intervention in trade. a. economic b. political c. cultural d. Social

a. economic

Free trade _____ the efficient use of resources within a country. a. might increase b. is likely to decrease c. stifles d. equates to

a. might increase

Companies participating in international trade _____ exert strong influences on government trading policies. a. Cannot b. Can

b. Can

Based on the theories of Smith, Ricardo, and Heckscher-Ohlin, in a country with access to cheap labor, productive land, and diverse plant life, it makes sense to _____ agricultural goods. a. Import b. Export

b. Export

______ trade is the economic policy of not discriminating against exports to or imports from foreign countries. a. Fair b. Free c. Restricted d. Balanced

b. Free

Sachs and Warner found a strong correlation between a(n) ______ response to trade and economic growth. a. closed b. Open

b. Open

What are three ongoing priorities for the WTO and agenda items at Doha? a. the effects of global warming on trade b. cutting tariff rates on services c. increasing income inequality in many countries d. phasing out agriculture subsidies e. limiting antidumping laws

b. cutting tariff rates on services d. phasing out agriculture subsidies e. limiting antidumping laws

Developing countries use ______ to move their manufacturing base from simply assembling component parts to the manufacturing of those parts by requiring that a specific fraction of a good be produced domestically. a. phishing b. dumping c. arbitration d. embargo

b. dumping

Today, many nations are _____ new trade policies associated with the WTO. a. in agreement with b. opposed to

b. opposed to

A tax on goods coming into or leaving a country is called a(n) ______. a. embargo b. tariff c. arbitrator d. Subsidy

b. tariff

In 2012, Brazil was concerned about a surge of vehicles coming in from Mexico and considering protectionist measures. Mexico decided to be proactive and imposed _____ to limit the shipments of vehicles to Brazil. a. an embargo b. voluntary export restraints c. local content requirements d. Subsidies

b. voluntary export restraints

Tariff rates on ______ products are generally much higher than tariffs on manufactured products or services. a. financial b. medical c. agricultural d. Service

c. agricultural

Ricardo's theory of _____ advantage states that it makes sense for a country to specialize in the production of those goods that it produces most efficiently and then purchase the goods that it produces less efficiently from other countries, even if this means buying goods from other countries that it could produce more efficiently itself. a. competitive b. quality c. comparative d. Absolute

c. comparative

Ricardo's theory of comparative advantage assumes ______ returns to scale. a. increasing b. decreasing c. constant d. Evolving

c. constant

When manufacturers export a product to another country at a price either below the price charged in its home market or below its cost of production, it is called ______. a. embargo b. phishing c. dumping d. Arbitration

c. dumping

Preempting demand, gaining volume cost advantages, building the brand, and establishing a long-term competitive advantage are associated with a. secondary-mover advantages. b. segmenting, targeting & positioning. c. first-mover advantages. d. brand equity.

c. first-mover advantages.

According to ______ trade theory, in reality, strategic trade policy is unworkable. a. restricted b. fair c. free d. Constant

c. free

Ricardo's theory encourages ______ because it suggests that trade is a positive-sum game where all participating countries realize economic gains. a. restricted trade b. isolationism c. free trade d. a planned economy

c. free trade

The most contentious implication behind new trade theory is the argument that it generates for ______ intervention. a. corporate b. competitor c. government d. Domestic

c. government

The ______ argument for trade intervention states that developing countries need to support new industries until they are strong enough to compete globally. a. tragedy of the commons b. balance sheet c. infant industry d. purchasing power parity

c. infant industry

Tariffs, quotas, and subsidies are forms of government _____. a. intervention b. antidumping c. investment d. Dismissal

c. investment

When applying reasoning for why Japan exports automobiles or why Switzerland exports watches, David Ricardo's theory of comparative advantage bases the explanation in terms of differences in a. management values. b. financial forecasts. c. labor productivity. d. retail marketing.

c. labor productivity.

What are four main instruments of trade policy? a. unions b. arbitration c. local content requirements d. tariffs e. import quotas f. antidumping duties

c. local content requirements d. tariffs e. import quotas f. antidumping duties

Wealthy country A enters into a free trade agreement with poor country B. Country B improves its productivity. Country A pays lower prices for goods imported from poor country B. However, Samuelson expresses concern that these lower prices may not offset possible ______ in wealthy country A. a. increase real wage rates b. tax increases c. lower real wage rates d. lower balance of payments

c. lower real wage rates

Reciprocal trade agreements between two or more partners are called _____ trade agreements. a. mutual b. mass c. multilateral d. Monopolistic

c. multilateral

The stalled Doha Round has caused many nations to use _____ to foster trade. a. local content requirements b. strict quota rents c. multilateral trade agreements d. voluntary export restraints

c. multilateral trade agreements

The WTO will continue to work to ______ markets because this will lead to an increase in world income, including an increase in income to developing nations. a. control b. minimize c. open d. Close

c. open

When a country is more efficient at producing a product than any other country, the country has a(n) ______ advantage in the production of that product. a. political b. comparative c. social d. Absolute

d. Absolute

Porter developed ______ broad attributes of a nation that shape the environment in which local firms compete. a. six b. two c. five d. Four

d. Four

______ is reflected in a nation in which the government does not attempt to influence what its citizens can buy from another country by applying import duties or what citizens can produce and sell to another country. a. Fair trade b. Bilateral trade c. Restricted trade d. Free trade

d. Free trade

New trade theory, which states that countries may have an advantage in exporting because of first-mover advantages, is different from which theory that says countries have export advantages because of factor endowments? a. Leontief paradox b. Product life-cycle c. Ricardo d. Heckscher-Ohlin

d. Heckscher-Ohlin

To achieve the highest efficiencies, a US company decides to manufacture its products in Thailand, but does all final assembly of the products in China. The company is focusing on the ______ implication for international business. a. tariff b. marketing c. political d. Location

d. Location

The factor that impacts all the theories of trade because companies should produce where it is most efficient is a. government regulation. b. demographics. c. product positioning. d. Location.

d. Location.

Which aspect of Porter's Diamond is best evidenced by the US semiconductor industry providing the basis for US success in the production of personal computers? a. factor endowments b. demand conditions c. firm strategy, structure, and rivalry d. related and supporting industries

d. related and supporting industries

When the government does not use quotas, taxes or other means to restrict what its citizens can buy from or sell to another country, it is called ___ trade

free

True or False: According to Adam Smith, a country should produce all goods at home that it can, even if it could buy those goods at a lower cost from other countries. True False

False

True or false: GATT has NOT recognized the infant industry argument as a legitimate reason for protectionism. True False

False

True or false: Krugman advocates that it is logical to expect the US government to ignore special-interest politics when forming policy. True False

False

True or false: Most economists prefer the Ricardian model when discussing trade even though it is a relatively poor predictor of real--world international trade. True False

False

True or false: Porter's theory of national competitive advantage stresses a decreased commitment by companies to research and development. True False

False

It has been argued that Donald Trump favors _____ views because he wants the country to export products but does not favor importing products

Mercantilism

The ___ trade policy argument suggests that governments should subsidize promising domestic firms in emerging industries and should also assist firms in overcoming barriers to entry created by foreign firms due to first-mover advantages.

Strategic

Government can detract or improve a country's advantage by choice of policies. True False

True

True or False: The United States has imposed trade sanctions on other countries in order to protect and promote human rights. True False

True

True or false: After analyzing current practices, it can be said that subsidies are not that successful at increasing the international competitiveness of domestic producers. True False

True

True or false: Export tariffs are sometimes levied to raise revenue for the government. True False

True

True or false: First mover advantages are especially important in industries where the global market can profitably support only a limited number of firms. True False

True

True or false: Government-imposed import quotas may limit a firm's ability to serve a country from a foreign location. True False

True

True or false: New trade theory is very useful in explaining trade patterns. True False

True

True or false: Successful industries within a country tend to group into clusters of related industries. True False

True

True or false: The US has an abundance of arable land and has long been an exporter of agricultural products. This is a good application of the Heckscher-Ohlin theory. True False

True

True or false: The benefits from free trade are not evenly distributed throughout an economy. True False

True

True or false: The fact that countries are using the WTO represents an important vote of confidence in the WTO's dispute resolution procedures. True False

True

True or false: To limit imports over the set quota, tariff rate quotas are common in agriculture. True False

True

While there were a total of 196 cases handled by GATT, records show that between 1995 and 2017, the WTO successfully handled about _____ trade disputes. a. 500 b. 250 c. 50 d. 10

a. 500

To gain competitive advantage, it is important to encourage companies to invest in ___ factors of production. a. Advanced b. Basic

a. Advanced

What are the types of factors of production identified by Porter? a. Basic and advanced b. Internal and external c. Traditional and modern Broad and narrow

a. Basic and advanced

Which of the following functions did the members of the WTO expect it to perform? a. Be effective at policing global trade. b. Facilitate future trade deals. c. Eliminate trade surpluses or deficits. d. Prevent worldwide recessions.

a. Be effective at policing global trade. b. Facilitate future trade deals.

What are two reasons countries should remain focused on opening markets? a. Because of high tariff rates on imports of selected goods from developing nations into developed nations b. Because average tariffs on manufactured goods remain higher than services c. Because average tariffs on services remains higher than on industrial goods d. Because reducing tariffs will lead to substantial losses in global trade

a. Because of high tariff rates on imports of selected goods from developing nations into developed nations c. Because average tariffs on services remains higher than on industrial goods

Besides the four broad attributes of a nation that shape the environment in which local firms compete, what two additional variables did Porter discuss that can influence the national diamond? a. Chance events b. Inflation c. Religion d. Government

a. Chance events d. Government

Which three industries are frequently targeted by antidumping actions? a. Chemicals b. Plastics c. Basic metal d. Technology e. Financial services

a. Chemicals b. Plastics c. Basic metal

Which two groups are negatively impacted when an import tariff is enacted? a. Consumers b. Domestic competitors c. Foreign producers d. Government

a. Consumers c. Foreign producers

Which of the following are two examples of basic factors of production as identified by Porter? a. Demographics b. Communication infrastructure c. Skilled labor d. Location

a. Demographics d. Location

According to the Samuelson critique, middle class wages in the United States will be _____ as the result of the offshoring of service jobs and rapid advances in foreign labor productivity. a. Diminished b. Increased

a. Diminished

A production possibilities frontier shows ____ returns to specialization when more units of resources are required to produce each additional unit. a. Diminishing b. Increasing

a. Diminishing

Companies will try to ____ governments to influence trade policy, such as promoting free trade or trade restrictions. a. Encourage b. Discourage

a. Encourage

According to new trade theory, the dominance of the United States in the commercial jet aircraft industry is related to ___ - mover advantages a. First b. Late

a. First

______ is reflected in a nation in which the government does not attempt to influence what its citizens can buy from another country by applying import duties or what citizens can produce and sell to another country. a. Free trade b. Fair trade c. Bilateral trade d. Restricted trade

a. Free trade

What are the two components of strategic trade policy? a. Governments should intervene to assist firms in overcoming barriers to entry created by foreign firms due to first-mover advantages. b. Governments should not use any subsidies to promote firms in emerging markets. c. Governments should subsidize promising domestic firms in emerging industries. d. Governments should let firms compete on their own against foreign firms who have first-mover advantages.

a. Governments should intervene to assist firms in overcoming barriers to entry created by foreign firms due to first-mover advantages. c. Governments should subsidize promising domestic firms in emerging industries.

In the mid 1800s, ______ was the first nation to officially follow free trade. a. Great Britain b. United States c. Sweden d. France

a. Great Britain

Generally, an open economy can ___ a country's stock of resources. a. Increase b. Decrease

a. Increase

When a country decides to specialize in the production of one item, it is most likely to ___ the level of production of that item. a. Increase b. Decrease

a. Increase

During the 1980s and early 1990s, protectionism around the world ___ a. Increased b. Decreased

a. Increased

What are two drawbacks of government intervention in free trade? a. It protects inefficient industries. b. It protects efficient industries. c. It invites retaliation and trade wars. d. Other countries will not react to intervention.

a. It protects inefficient industries. c. It invites retaliation and trade wars.

______ is the first theory of trade that advocated that a country should export more than it imports and should accumulate gold and silver to make up the difference and maintain a trade surplus. a. Mercantilism b. New Trade c. Planned economy d. Isolationism

a. Mercantilism

Which two factors does Porter label as basic factors of production? (Check all that apply.) a. Natural resources b. Climate c. Skilled labor d. Technology

a. Natural resources b. Climate

Which trade theory has these implications: (1) nations may benefit from trade even when they do not differ in resource endowments or technology; and (2) specialization allows for scale economies and lower production costs? a. New trade b. Mercantilism c. Fair trade d. Ricardo

a. New trade

What are two reasons diminishing returns to specialization occur? (Check both responses.) a. Not all resources are of the same quality. b. Production might draw on marginal resources whose productivity is more than resources initially used. c. Different goods use resources in different proportions. d. Different goods use resources in the same proportions.

a. Not all resources are of the same quality. c. Different goods use resources in different proportions.

What aspect of free trade does Samuelson see as a potential negative influence on international trade? a. Offshoring of service jobs such as call centers b. Increased real wage rates in richer countries c. Trade agreements among foreign governments d. Dynamic gains associated with specialized goods

a. Offshoring of service jobs such as call centers

Higher tariff rates on agricultural products come from a desire to ___ domestic agriculture and traditional farming areas. a. Protect b. Outsource

a. Protect

The net effect of high tariff barriers and subsidies on agricultural products is to ___ prices to consumers. a. Raise b. Lower

a. Raise

The TRIPS agreement is based on the notion that inadequate protection of intellectual property ___ the incentive for innovation. a. Reduces b. Increases

a. Reduces

The Uruguay Round started in 1986 and addressed which three issues? a. Reducing agricultural subsidies b. Increasing embargoes on intellectual property. c. Reducing tariffs on industrial goods d. Increasing technology subsidies e. Reducing tariffs on manufactured goods

a. Reducing agricultural subsidies c. Reducing tariffs on industrial goods e. Reducing tariffs on manufactured goods

Choose the four national attributes that Porter theorizes shape the environment that local firms compete in. a. Related & supporting industries b. Trade surpluses & trade imbalances c. Exchange rates d. Demand conditions e. Firm strategy, structure & rivalry f. Factor endowments

a. Related & supporting industries d. Demand conditions e. Firm strategy, structure & rivalry f. Factor endowments

What are three reasons that the global trading system erected under GATT was strained during the 1980s and early 1990s? (Check all that apply.) a. The economic success of Japan b. A wave of economic recession throughout Europe. c. The persistent trade deficit in the United States d. Countries finding ways to get around GATT regulations e. The economic distress of many African countries

a. The economic success of Japan c. The persistent trade deficit in the United States d. Countries finding ways to get around GATT regulations

According to the text, which of the following two world events imply that free trade is not a global consensus? a. The withdrawal of Britain from EU b. The demise of global trade routes c. The nuclear disarmament in North Korea d. The election of Donald Trump

a. The withdrawal of Britain from EU d. The election of Donald Trump

What are two characteristics of countervailing duties? a. They can be substantial and stay in place for 5 years. b. They are equivalent to a "slap on the wrist." c. They are a special tariff. d. They only hold for 90 days.

a. They can be substantial and stay in place for 5 years. c. They are a special tariff.

What are two ways trade barriers hamper a firm's productive activities? a. They raise the cost of exporting products. b. They allow access to the imports a firm may need. c. Quotas limit the ability to serve a country from outside locales. d. They increase the ability to operate at full capacity.

a. They raise the cost of exporting products. c. Quotas limit the ability to serve a country from outside locales.

In what two ways can a government use intervention in trade as a foreign policy instrument? a. To pressure or punish "rogue states" b. To grant preferential trading terms to countries it wants to build relations with c. To pressure or punish countries that produce most efficiently d. To grant preferential trade terms to countries that don't abide by trade laws

a. To pressure or punish "rogue states" b. To grant preferential trading terms to countries it wants to build relations with

What are the two reasons that export tariffs are levied? a. To reduce exports from an industry sector, often for political reasons b. To raise revenue for the government c. To raise revenue for domestic producers d. To lower the price for foreign consumers

a. To reduce exports from an industry sector, often for political reasons b. To raise revenue for the government

The trade theories associated with Smith and Ricardo advocate for _____ free trade. a. Unrestricted b. Restricted

a. Unrestricted

Bureaucratic rules implemented by governments that benefit producers and hurt consumers are called ______ trade policies. a. administrative b. global c. domestic d. Elementary

a. administrative

Governments develop ______ policies to punish foreign companies that sell their products at below fair market value. a. antidumping b. embargo c. subsidy d. Administrative

a. antidumping

Porter's study identified components of the German textile and apparel sector: cotton, wool, synthetic fibers, sewing machine needles, textile machinery. These were all successful industries in a single country that grouped into related industries. This grouping is an example of a(n) a. cluster. b. entity. c. innovation. d. Rivalry.

a. cluster.

Porter states that a company can gain ______ advantage if their home customers are demanding and knowledgeable. a. competitive b. comparative c. Absolute

a. competitive

Countries can use ______ duties on an offending import to offset dumping. a. countervailing b. exchange rate c. excise d. Voluntary

a. countervailing

n the study by MIT economist David Autor noted in the text, it was found that regions of the United States with greater exposure to competition from Chinese manufacturers saw _____ employment. a. declining b. increasing c. Stagnated

a. declining

Country A wants to produce more rice. Unfortunately, it will have to farm less productive land to produce this rice. This fact represents the idea of ______ returns to specialization. a. diminishing b. comparative c. constant d. Increasing

a. diminishing

It takes 12 units of resources to produce 100 pounds of silk. It takes 13 units to produce 115 pounds of silk and 15 units to produce120 pounds of silk. This is an example of ______ returns to specialization. a. diminishing b. comparative c. constant d. Increasing

a. diminishing

Protecting intellectual property through patents, trademarks, and copyrights, fosters innovation and can lead to what two results? a. economic growth b. rising living standards c. a decrease in trade d. decreasing inflation

a. economic growth b. rising living standards

Based on new trade theory, as the size of markets increases, companies may be able to attain better ______. a. economies of scale b. factor endowments c. product life cycles d. tariff barriers

a. economies of scale

When a country restricts the export of a product, it is implementing a(n) _____. a. export ban b. export tariff c. export quota d. voluntary export restraint

a. export ban

Global telecommunications and _____ have been targeted by the WTO as industries that need expanded trade agreements. a. financial services b. computer components c. agriculture d. intellectual property

a. financial services

The development of the superjumbo jet by Airbus, which basically shuts out other producers of this type of aircraft, demonstrates the idea of a(n) ______ based on scale economies because the global market can probably only support one producer of superjumbo aircraft. a. first-mover advantage b. Leontief paradox c. Sullivan principle d. tragedy of the commons

a. first-mover advantage

Manatee Mfg. is able to source parts for its refrigeration products from anywhere in the world because the United States does not place any quotas or limitations on the imports they need. This is a reflection of a _____ policy. a. free trade b. restricted trade c. mixed economy d. planned economy

a. free trade

Porter's theory stresses the advantages of businesses working with ______ to promote strong competition within domestic markets. a. government b. educators c. marketers d. Competitors

a. government

What are the four issues currently at the forefront of the WTO agenda? a. high tariffs on nonagricultural goods and services b. entrepreneurial activities c. lack of intellectual property protection d. antidumping policies e. local content requirements f. protectionism in agriculture

a. high tariffs on nonagricultural goods and services c. lack of intellectual property protection d. antidumping policies f. protectionism in agriculture

To shift a country's production possibility frontier outward, it is necessary to (Check the two that apply.) a. increase the stock of the country's resources. b. increase the efficiency with which resources are used. c. decrease the stock of the country's resources. d. decrease the efficiency with which resources are used

a. increase the stock of the country's resources. b. increase the efficiency with which resources are used.

The oldest argument for government intervention in trade where developing nations must protect their domestic industries until they are ready to compete globally is the ______ argument. a. infant industry b. local content c. national security d. voluntary export restraint

a. infant industry

A country is said to have an absolute advantage in the production of an item when the country a. is more efficient than any other country at producing the item. b. exports more of the item to other nations than any other country. c. is able to import the item at a lower cost than producing it themselves. d. promotes the idea of importing but downplays the idea of exporting.

a. is more efficient than any other country at producing the item.

Country A wants to lower trade barriers with its neighbor, Country B. While both countries support free trade, they are both reluctant to lower their barriers because they are not sure the other country will reciprocate. What obstacle is preventing the advancement of free trade between these countries? a. lack of trust b. view of the first-mover advantage c. fear of rising producer costs d. fear of rising consumer costs

a. lack of trust

In order to win a contract in Mexico, QVB Auto Manufacturing must make 65% of the component parts of their vehicles in Mexico. This is an example of a a. local content requirement. b. local distribution requirement. c. international content requirement. d. local supplier requirement.

a. local content requirement.

Developing countries use ______ to move their manufacturing base from simply assembling component parts to the manufacturing of those parts by requiring that a specific fraction of a good be produced domestically. a. local content requirements b. embargoes c. government subsidies d. voluntary export restraints

a. local content requirements

The basic metals, chemicals, plastics, and machinery and electrical equipment industries account for the ______ of antidumping actions. a. majority b. Minority

a. majority

The final conclusion of the product life-cycle theory is that ultimately a product a. may be exported back to the country where it was originally invented. b. . may be shipped to nations where that product lacks a cultural fit. c. will need to be "extended" to continue benefiting the market. d. will only be produced for the local market.

a. may be exported back to the country where it was originally invented.

The final conclusion of the product life-cycle theory is that ultimately a product a. may be exported back to the country where it was originally invented. b. will need to be "extended" to continue benefiting the market. c. may be shipped to nations where that product lacks a cultural fit. d. will only be produced for the local market.

a. may be exported back to the country where it was originally invented.

Select all that apply A basic message of Ricardo's theory of comparative advantage is that: (Check the two that apply.) a. potential world production is greater with unrestricted free trade than it is with restricted trade. b. trade is a zero-sum game that creates clear winners and losers. c. even if countries lack an absolute advantage in the production of any good, consumers can still consume more if there are no restrictions on trade. d. by strategically using subsidies, a government would increase the chances of its domestic firms becoming first movers in newly emerging industries.

a. potential world production is greater with unrestricted free trade than it is with restricted trade. c. even if countries lack an absolute advantage in the production of any good, consumers can still consume more if there are no restrictions on trade.

When analyzing the economic effects of import tariffs, it has been concluded that tariffs are considered anti-consumer and pro-_____. a. producer b. importer c. government d. Consumer

a. producer

An import _____ is a type of trade restriction that sets a physical limit on the quantity of a product that can be imported into the country in a set period of time. a. quota b. tariff c. arbitration d. Subsidy

a. quota

GATT rules initially only dealt with trade in manufactured goods and commodities. With the increase in trade in the ______ sector, the Uruguay Round sought to establish agreements to cover this area. a. service b. communication c. technology d. Agriculture

a. service

Free trade can result in dynamic gains that ______ economic growth. a. stimulate b. decrease c. Stall

a. stimulate

Which three trade barriers constrain a firm's ability to disperse its productive activities? a. tariff barriers b. quotas c. dynamism d. subsidies e. Ethnocentrism

a. tariff barriers b. quotas d. subsidies

What is considered the simplest instrument of trade policy? a. tariffs b. antidumping duties c. subsidies d. Quotas

a. tariffs

Raymond Vernon's product life-cycle theory was based on the observation that for most of the 1900s the majority of the world's new products were developed in a. the United States. b. Germany. c. Japan. d. the United Kingdom.

a. the United States.

What are three sources of economies of scale? a. the ability of large-volume producers to use more specialized equipment b. the ability of large-volume producers to use more effective, specialized employees c. spreading fixed costs over a larger volume d. the opportunity for product customization and narrow product lines e. spreading costs over a smaller volume of product

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

According to the product life cycle theory, when a product is in the early stages of its life cycle, it is most likely to be produced and exported from a. the country where it was developed. b. countries that adopt the product.

a. the country where it was developed.

In 2003, Libya announced it would terminate a program to build nuclear weapons. This is thought to be a result of ______ placed against Libya by the United States. a. trade sanctions b. antidumping policies c. local content requirements d. voluntary export restraints

a. trade sanctions

Unilateral lowering of trade barriers has not occurred mostly due to a lack of _____ among governments. a. trust b. production c. ethnocentrism d. Parity

a. trust

The proponents of mercantilism see trade as a ______ -sum game. a. zero b. negative c. Positive

a. zero

A company _____ benefit from related industries that are internationally competitive and can spill over into the company. a. Cannot b. Can

b. Can

Which form of returns to specialization means that the units of resources required to produce one unit are assumed to remain the same no matter where a country is on the production possibilities frontier? a. Increasing b. Constant c. Diminishing d. Absolute

b. Constant

______ is the acronym for the multilateral agreement established in 1947 aimed at the abolition of quotas and the reduction of tariff duties among the contracting nations. a. ISO b. GATT c. WTO d. JIT

b. GATT

What is the likely result for the gains from specialization according to the concept of diminishing returns? a. Any gains from specialization are depleted by late-mover disadvantages. b. Gains are likely to be exhausted before specialization is complete. c. According to the concept of diminishing returns, there are no achieved gains from specialization. d. Gains from specialization are likely to drive new business.

b. Gains are likely to be exhausted before specialization is complete.

Which two activities are in place in the US to protect domestic farmers from foreign competition? a. Intellectual property rights b. Government subsidies c. Countervailing duties d. High tariff rates

b. Government subsidies d. High tariff rate

The Middle East has an abundance of oil reserves; therefore, exporting oil supports the ______ theory which is based on creating an advantage based on factor endowments. a. Ricardo b. Heckscher-Ohlin c. Leontief d. Porter-Friedman

b. Heckscher-Ohlin

What is the theory that states that countries will export goods that make intensive use of the factors that are abundant in the economy? a. Ricardo b. Heckscher-Ohlin c. Marx-Lenin

b. Heckscher-Ohlin

With regard to strategic trade policy, which two actions can governments take in response to pressure from business firms? a. Alleviate regulations for foreign expatriates. b. Increase protectionism. c. Push for more open markets and freer trade. d. Encourage environment-friendly product labeling.

b. Increase protectionism. c. Push for more open markets and freer trade.

A new trade theorist would say that a company should rely on which three things to gain first-mover advantages? a. Privacy b. Innovation c. Luck d. Communication e. Entrepreneurship

b. Innovation c. Luck e. Entrepreneurship

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 known as the a. Porter paradox. b. Leontief paradox. c. Ricardo paradox. d. Greenspan paradox.

b. Leontief paradox.

Export tariffs are ___ common than import tariffs. a. More b. Less

b. Less

Which of the following two outcomes typically occur with the implementation of local content regulations? a. Local content regulations provide the biggest protection for the consumer. b. Local content regulations provide protection for a domestic producer. c. The restrictions on imports make it easier for foreign competition to enter the market. d. The restrictions on imports raise the prices of imported components, which lead to higher prices for consumers.

b. Local content regulations provide protection for a domestic producer. c. The restrictions on imports make it easier for foreign competition to enter the market.

Which theory implies that the global market may only be able to support a limited number of firms in industries when the output required to attain economies of scale represents a significant amount of total world demand? a. Smith's theory b. New trade theory c. The Product Life-Cycle theory d. The Heckscher-Ohlin theory

b. New trade theory

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? a. Comparative advantage theory b. Product life-cycle c. Absolute advantage theory d. New trade theory

b. Product life-cycle

Which theory is said to predict trade patterns more accurately? a. Vernon b. Ricardo c. Samuelson d. Heckscher-Ohlin

b. Ricardo

If we accept that the tenets of strategic trade policy are correct, then the government _____ intervene in international trade. a. should not b. Should

b. Should

Choose three advanced factors that Porter believes are MOST significant for competitive advantage. a. Climate b. Skilled labor c. Research facilities d. Technological know-how e. Demographics

b. Skilled labor c. Research facilities d. Technological know-how

Many Western countries imposed trade sanctions against ______ during the 1980s and 1990s to encourage the country to improve human rights policies. a. South Korea b. South Africa c. Portugal d. Norway

b. South Africa

One consequence of free trade is higher domestic consumption and a more efficient use of resources. These would be considered _____ economic gains. a. Dynamic b. Static

b. Static

______ constrain a firm's ability to export its products by raising the price of the exported product, which could put the firm at a competitive disadvantage with domestic firms in that country. a. Interest rates b. Tariff barriers c. Inflation rates d. Fiscal policies

b. Tariff barriers

______ permit a specific quantity of imported goods to enter the country under a reduced rate of duty during the quota period. a. Quota tariffs b. Tariff rate quotas c. Ad valorem tariffs d. Specific tariffs

b. Tariff rate quotas

Why do exporting countries agree to impose voluntary export restraints? a. To limit production of additional output b. To avoid damaging tariffs and import quotas on their products c. To allocate labor to a different industry d. To avoid subsidizing their domestic producers

b. To avoid damaging tariffs and import quotas on their products

What three predictions of new trade theory regarding trade patterns are supported by studies? a. Trade decreases customization possibilities. b. Trade decreases the variety of products available. c. Trade tends to increase the average costs of goods. d. Trade increases the variety of products available. e. Trade leads to lower average costs. f. Trade increases the specialization of production within an industry.

b. Trade decreases the variety of products available. e. Trade leads to lower average costs. f. Trade increases the specialization of production within an industry.

What two simultaneous outcomes are implied by new trade theory? a. a nation can support more than one producer of goods b. a nation can increase the variety of goods available to consumers c. a nation can allow other nations to compete in most product categories without incurring losses d. a nation can lower the cost of the goods being offered to consumers

b. a nation can increase the variety of goods available to consumers d. a nation can lower the cost of the goods being offered to consumers

The Japanese government is used in the text as an example of how governments have effectively used ______ to limit imports of vehicle parts through bureaucratic rules. a. countervailing duties b. administrative trade policies c. tariff rate quotas d. voluntary export restraints

b. administrative trade policies

A country might create safety standards for certain products that other nations can't comply with. As a result, these nations can't be involved with exporting parts for those goods and trade does not exist. These safety standards are a form of _____. a. antidumping policy b. administrative trade policy c. quota rent d. voluntary export restraint

b. administrative trade policy

Sometimes governments pay subsidies to help companies survive challenging economic climates. In effect, these companies have a. economies of scale. b. an unfair competitive advantage. c. brand identity. d. diseconomies of scale.

b. an unfair competitive advantage.

The infant industry argument has what potential negative consequence? a. assuming that all related industries will require subsidies. b. causing infant industries to lack efficiency. c. encouraging infant industries to develop efficiencies quickly. d. assuming firms can make efficient long-term investments.

b. causing infant industries to lack efficiency.

Economic studies have suggested that according to the theory of ______ advantage, countries will experience higher growth rates if they follow a more open stance toward international growth. a. competitive b. comparative c. Absolute

b. comparative

Heckscher and Ohlin identified differences in national factor endowments as the root of ______. a. absolute advantage b. comparative advantage c. deregulation d. Entrepreneurship

b. comparative advantage

According to new trade theory, first movers in an industry can gain a scale-based _____ advantage that later entrants find almost impossible to match. a. geographic b. cost c. production d. Marketing

b. cost

When the Smoot-Hawley Act was put into place it _______ as a way to protect domestic industries. a. relied on local content requirements b. created a wall of tariff barriers. c. put into place embargoes on factors of production d. implemented quota rent

b. created a wall of tariff barriers.

According to new trade theory, the first mover's ability to benefit from increasing returns ______ for other firms. a. accelerates the demand b. creates a barrier to entry c. fosters the competitive spirit

b. creates a barrier to entry

One benefit of free trade is that is stimulates economic growth and wealth creation. In other words, it provides _____ economic gains. a. primary b. dynamic c. secondary d. Static

b. dynamic

Portugal can produce wine and cloth with less labor than England. But, given all factors of production, England can produce cloth relatively better than Portugal. According to Ricardo's theory of comparative advantage, it make sense for England to a. export both cloth and wine to Portugal. b. export cloth and import wine from Portugal. c. import cloth from Portugal, but export wine. d. import both cloth and wine from Portugal

b. export cloth and import wine from Portugal.

If a country places a 20% tax on dairy products exported to other nations in order to limit exports and have sufficient supplies of dairy products for the home country, it is using a(n) ______. a. embargo b. export tariff c. subsidy d. import quota

b. export tariff

The Heckscher-Ohlin theory of international trade focuses on ______ when explaining what a country chooses to export. a. competitive advantage b. factors of production c. differences in labor productivity d. the product life cycle

b. factors of production

Since the global market can only support one producer of superjumbo aircraft, Airbus had the benefit of a(n) _____. a. offshoring application b. first-mover advantage c. factor endowment d. small-scale entry

b. first-mover advantage

GATT was put into place by the US government as a way to a. eliminate FDI. b. foster free trade. c. eliminate free trade. d. foster isolationism.

b. foster free trade.

Porter states that ______ can influence each of the four components of the diamond through subsidies, education policies and policies towards capital markets. a. society b. government c. big business d. Competition

b. government

If a country has an open economy and embraces free trade, citizens, on average, will benefit from ______ income levels and living standards. a. constant b. higher c. lower d. Depressed

b. higher

The United States has placed a limit on the amount of tuna in airtight containers that can be imported into this country. This is an example of a(n) _____. a. export tariff b. import quota c. voluntary export restraint d. Subsidy

b. import quota

New trade theory states that some countries specialize in the production and export of a particular product because a. other countries do not possess the same factor endowments. b. in certain industries the world can only support a limited number of firms. c. domestic demand is lower than international demand. d. location economies support their industrial advantage

b. in certain industries the world can only support a limited number of firms.

If a country decides to focus production on wheat because it has an absolute advantage in this crop and it trades with another country that has an absolute advantage in its corn crop, then the level of production of these crops for both countries is likely to a. decrease b. increase c. remain constant d. show no change

b. increase

According to a study cited in the text, if advanced countries stopped providing subsidies to farmers, global trade in agricultural products would a. decrease by 20%. b. increase by 50%. c. diminish by half. d. Equalize.

b. increase by 50%

One explanation for the Leontief paradox is that the US has an advantage and exports goods produced with a. imported parts. b. innovative technologies. c. more capital investment. d. low-cost labor.

b. innovative technologies.

GATT negotiations continue to deal with additional issues such as (Check the three that apply.) a. income inequality. b. intellectual property. c. agricultural subsidies. d. exchange rates. e. Services.

b. intellectual property. c. agricultural subsidies. e. Services.

When governments intervene in foreign trade, they often claim they are protecting ______ from unfair foreign competition. a. dividends b. jobs c. stock prices d. Laws

b. jobs

A(n) ______ states that some percentage of a good must be produced domestically. a. voluntary export restraint b. local content requirement c. quota rent d. antidumping policy

b. local content requirement

It has been argued that Donald Trump favors _____ views because he wants the country to export products but does not favor importing products. a. expansionism b. mercantilism c. free trade d. a planned economy

b. mercantilism

When a government intervenes to achieve a surplus in the nation's balance of trade, this action is consistent with the main tenet of ______. a. expansionism b. mercantilism c. free trade d. an open economy

b. mercantilism

While not as relevant today, the trade theory that was useful in explaining the pattern of trade when the US dominated the global market is the ______ theory. a. Heckscher-Ohlin b. product life-cycle c. Friedman d. Samuelson

b. product life-cycle

By threatening ______ trade sanctions, one country can convince another country to open its markets. a. short-term b. punitive c. favorable d. Supportive

b. punitive

When discussing constant returns to specialization, it is realistic to assume that the units of resources required to produce one unit will _____ no matter where a country is on the production possibilities frontier. a. diminish rapidly b. remain the same c. increase gradually

b. remain the same

If a country assesses a fixed charge of $5 per unit of rice that's imported, it is using a(n) ______ tariff. a. ad valorem b. specific c. forward d. Spot

b. specific

The nationwide company, Nightingale Health Systems, received a tax break from the government when it was faltering and ready to declare bankruptcy. This subsidy helped the company with production costs and allowed it to have a stronger presence in the competitive health industry. This tax break is a type of _____. a. tariff b. subsidy c. embargo d. Quota

b. subsidy

What's the main reason a country would use export tariffs? a. to foster competition and ultimately lower costs to the consumer b. to ensure sufficient supply of a good within the country c. to take advantage of lower production costs d. to achieve economies of scale

b. to ensure sufficient supply of a good within the country

Krugman argues that if each country seeks to follow a strategic trade policy to protect its interests, this may lead to a ______. a. trade exchange b. trade war c. voluntary export restriction d. trade restriction

b. trade war

Country A subsidizes oil development and Country B is losing any competitive advantage because of it. Krugman would agree that Country B hopes to minimize subsidies to prevent a a. trade exchange. b. trade war. c. global response. d. union action.

b. trade war.

A criticism of Ricardo's theory of comparative advantage is that it is a simple model that includes many a. outdated products. b. unrealistic assumptions. c. former Communist countries. d. data errors.

b. unrealistic assumptions

The trade sanctions on Iraq that were imposed in 1991 after the Gulf War are an example of a. encouraging domestic firms to increase their production. b. using trade policy to punish rogue states. c. using economic sanctions to direct organizational policy. d. implementing export barriers to improve domestic production.

b. using trade policy to punish rogue states.

As noted in the text, the US government used the threat of trade sanctions to try to convince the _____ government to enforce its intellectual property laws since massive copyright infringements in that country have cost US companies millions of dollars in lost revenue. a. British b. Mexican c. Chinese d. Russian

c. Chinese

Which type of returns to specialization happen when additional units of resources are required to produce each additional unit? a. Increasing b. Constant c. Diminishing d. Comparative

c. Diminishing

What concept negates the idea that a country can specialize to the degree suggested by the Ricardian model? a. Economies of scale b. Dynamic gains c. Diminishing returns d. Free trade

c. Diminishing returns

Which two groups are positively impacted when an import tariff is enacted? a. Consumers b. Foreign producers c. Government d. Domestic producers

c. Government d. Domestic producers

What theory argues that free trade is beneficial, but that differences in factor endowments, not productivity, determine the pattern of international trade? a. Leontief b. Porter-Friedman c. Heckscher-Ohlin d. Ricardo

c. Heckscher-Ohlin

What assumption does the Ricardian model of comparative advantage make in terms of converting resources? a. It assumes that the exporting country should be able to easily convert resources but the importing country should not be able to. b. It assumes that all resources are static and incapable of shifting. c. It assumes that all resources can easily shift from one thing to another. d. It assumes that the importing country should be able to easily convert resources but the exporting country should not be able to.

c. It assumes that all resources can easily shift from one thing to another.

______ raised questions about the Heckscher-Ohlin theory. a. Welch b. Sachs c. Leontief c. Vernon

c. Leontief

Which economist was a key figure in the early free trade movement in Great Britain? a. Samuelson b. Marx c. Ricardo d. Keynes

c. Ricardo

Reflecting the theories of Smith, Ricardo, and Heckscher-Ohlin, free trade permits ______, which allows a country to manufacture and export in those areas where they have a comparative advantage. a. Embargoes b. quality control c. Specialization d. Quotas

c. Specialization

According to the text, what are three economic effects of import tariffs? a. Tariffs are pro-consumer. b. Tariffs are generally anti-producer. c. Tariffs are anti-consumer. d. Tariffs reduce the overall efficiency of the world economy. e. Tariffs improve the overall efficiency of the world economy. f. Tariffs are generally pro-producer

c. Tariffs are anti-consumer. d. Tariffs reduce the overall efficiency of the world economy. f. Tariffs are generally pro-producer

What is a bound tariff rate? a. The tariff rate associated with dumped goods b. The tariff rate associated with exports to underdeveloped nations c. The highest tariff rate that can be charged d. The lowest tariff rate that can be charged

c. The highest tariff rate that can be charged

In order to preserve protectionism, many countries are looking to which of these loopholes associated with antidumping? a. What constitutes an imported product b. The vague definition of protectionism c. The vague definition of dumping d. How to price products that are dumped

c. The vague definition of dumping

What organization now arbitrates trade disputes and monitors trade policies of member countries? a. IMF b. World Bank c. WTO d. UN

c. WTO

The theory of ______ advantage was the first to attack the tenet of mercantilism which implied that trade is a zero-sum game. a. social b. political c. absolute d. Comparative

c. absolute

What was the basic premise of mercantilism? a. countries should encourage both imports and exports b. countries should discourage both imports and exports c. countries should encourage exports and discourage imports d. countries should encourage imports and discourage exports

c. countries should encourage exports and discourage imports

At one time, strict trade sanctions were in place between the US and Cuba as a way to _____. a. establish voluntary export restraints on additional products and services b. limit competition from other outside nations c. create economic hardship and replace the form of government in Cuba d. encourage consistent trade between the two nations

c. create economic hardship and replace the form of government in Cuba

According to Michael Porter, there is a strong correlation between _____ and the creation and persistence of competitive advantage in an industry. a. international monopolies b. supply and demand c. domestic rivalry d. technological know-how

c. domestic rivalry

The reductions in the cost of a single unit that result from large scale output of that product are called a. the product life-cycle. b. purchasing parity. c. economies of scale. d. mass customization

c. economies of scale.

The WTO is more successful than GATT because the WTO has ______ mechanisms that make it more effective. a. fiscal b. consumer c. enforcement d. Monetary

c. enforcement

In 1975, Congress restricted the export of US crude oil in response to the actions taken by OPEC. This restriction is an example of which trade policy? a. local content requirement b. import quota c. export ban d. quota rent

c. export ban

According to Heckscher and Ohlin, each country has certain ______, such as land, labor, and capital. a. output endowments b. wealth sources c. factor endowments d. economic principles

c. factor endowments

The ______ theory predicts that mature industries tend to shift production out of advanced nations and into low-cost assembly locations. a. Ricardian b. new trade c. product life-cycle d. absolute advantage

c. product life-cycle

The main objective of antidumping policies is to a. subsidize components made by foreign producers. b. satisfy local content requirements. c. protect domestic producers from unfair foreign competition. d. support tariff rate quotas.

c. protect domestic producers from unfair foreign competition.

Developed countries use local content requirements to a. encourage overseas investment. b. allow local industries to export more product. c. protect local jobs from foreign competition. d. outsource jobs.

c. protect local jobs from foreign competition.

The primary problem with mercantilism is that its supporters claimed that trade should a. limit both exports and imports. b. boost both exports and imports. c. show a gain by one country that results in a loss by another. d. be a win-win situation for all countries.

c. show a gain by one country that results in a loss by another.

Government intervention may NOT be well executed due to the possibility that policy will be captured by ______. a. foreign competition b. late-movers in the industry c. special interest groups d. Consumers

c. special interest groups

A tax on imports that is specified as a fixed monetary amount per unit of import is called a(n) ______ tariff. a. ad valorem b. fixed c. specific d. spot forward

c. specific

A(n) ______ is a payment by the government to a domestic producer to help lower production costs so they are better able to compete with foreign imports. a. tariff b. import quota c. subsidy d. voluntary export restraint

c. subsidy

The main criticism of mercantilism was that a. a government can not legally intervene to achieve a surplus in the balance of trade. b. it is unethical to increase a country's wealth by foreign trade. c. the goal of a constant positive balance of trade is impossible. d. you must always import more than you export.

c. the goal of a constant positive balance of trade is impossible.

One of the greatest benefits of local content regulations for a producer is that _____, a. they create monopolistic organizations b. domestic producers are not taxed c. they limit foreign competition d. service providers receive the same benefits as product providers

c. they limit foreign competition

Japan imposed a limit on auto exports to the US as a result of pressure by the US government. What instrument of trade policy does this represent? a. ad valorem tariff b. subsidy c. voluntary export restraint d. tariff rate quota

c. voluntary export restraint

A self-imposed trade restriction on the quantity of a good that the exporting country is allowed to export to another country is called a(n) a. voluntary import restriction. b. tariff rate quota. c. voluntary export restraint. d. ad valorem tariff.

c. voluntary export restraint.

Company ABC in Scotland exports a pound of cheese to the US for $100. The US places a 9% tax on the cheese as a proportion of its value. What type of tariff is this? a. Spot forward b. Export c. Specific d. Ad valorem

d. Ad valorem

The Autor study noted in the text provides evidence of support of Samuelson's thesis. Which country did the study use to analyze its manufacturing exposure within the United States? a. Indonesia b. India c. Japan d. China

d. China

According to product life-cycle theory, as products mature, ______ considerations become far more important in the competitive process. a. cultural b. political c. late-mover d. Cost

d. Cost

The _____ Round started in 2001 and continues today to deal with the issues of agriculture protectionism, protection of intellectual property, and other priorities of the WTO. a. Paraguay b. GATT c. Uruguay d. Doha

d. Doha

Which of the following statements regarding openness of an economy and growth is TRUE? a. Dynamic changes that result from trade make economies grow more slowly. b. Both open and closed economies tend to grow at the same rate. c. Economies closed to trade are more likely to grow at a faster rate. d. Economies that are open to trade grow at a faster rate economically than those that are closed.

d. Economies that are open to trade grow at a faster rate economically than those that are closed.

What did Porter call the concept where firms are typically most sensitive to the needs of their closest customers? a. Unitary demand b. Demand conditions c. Supporting industries d. Elastic demand

d. Elastic demand

In Porter's model of the determinants of national competitive advantage, he noted many US firms were led by people with ______ backgrounds, likely leading to US firms' lack of attention to improving manufacturing process and product design. a. marketing b. operations c. engineering d. Finance

d. Finance

A company decides to outsource all product designs to Singapore because it has been found to have the most efficient design companies. In this situation, the ______ implication for international business is being considered. a. trade b. first-mover c. policy d. Location

d. Location

Which theory does NOT support unrestricted free trade between countries? a. Hecksher-Ohlin's Theory b. Smith's Theory c. Ricardo's Theory d. Mercantilism

d. Mercantilism

As the text notes, Donald Trump appears to embrace which view on trade? a. absolute advantage b. product life cycle c. comparative advantage d. Mercantilist

d. Mercantilist

Which theory states that for products where economies of scale are significant and that control a substantial amount of world demand, the first movers in an industry can gain a scale-based cost advantage NOT available to late entrants? a. Mercantilism b. Product life-cycle c. Ricardo d. New trade

d. 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. a. Heckscher-Ohlin b. Product life-cycle c. Ricardo d. New trade

d. New trade

A foreign nation is concerned that all jobs in the computer manufacturing industry will be lost to another country. The government decides to step in and prevent this from happening and implements tariffs on certain imports. The leader is praised for this action and reminds voters of this during the next election. In this situation, government intervention is based on a _____ argument. a. physical b. social c. economic d. Political

d. Political

The economic benefit gained when the supply is artificially restricted by an import quota is called quota ______. a. tariff b. embargo c. subsidy d. Rent

d. Rent

According to strategic trade policy, governments should use ______ to support development work aimed at commercializing target technologies. a. tariffs b. embargoes c. quotas d. Subsidies

d. Subsidies

Taxes placed on imports to protect domestic producers from foreign competition and to produce revenue for the government are called a. income. b. quotas. c. embargoes. d. Tariffs.

d. Tariffs.

The Leontief paradox would be used to explain which of these situations? a. The effects of diminishing returns are negated with the introduction of free trade. b. Free trade augments the effects of diminishing returns. c. In order to increase production, the US should specialize in the production and export of a single good. d. The US exports goods that require skilled labor and imports heavy manufacturing products that require large amounts of capital.

d. The US exports goods that require skilled labor and imports heavy manufacturing products that require large amounts of capital.

What extended GATT rules to provide enhanced protection for intellectual property and significantly reduced barriers on trade in textiles? a. The World Bank b. ISO 9000 c. The Bretton Woods System d. The Uruguay Round

d. The Uruguay Round

What occurs when a company practices dumping? a. The firm is placing a quota rent on goods but not services. b. The firm is charging more for a product in one country than it does in others. c. The firm is asking the government for financial assistance to be more competitive. d. The firm is unloading excess production in a foreign market.

d. The firm is unloading excess production in a foreign market.

______ is the organization that encompasses GATT, GATS and TRIPS. a. ISO b. UN c. IMF d. WTO

d. WTO

Economist David Hume argued that an inherent inconsistency with mercantilism is that in the long run no country could sustain a. sufficient gold reserves to support the value of its currency. b. sufficient gold reserves to pay for all the nation's exports. c. a central bank with a large enough vault to hold all of the nation's gold reserves. d. a surplus on the balance of trade.

d. a surplus on the balance of trade.

A(n)______ tariff is a tax that is levied on a good on the basis of its value, not on the basis of its weight or quantity. a. specific b. fixed c. flexible d. ad valorem

d. ad valorem

The WTO does allow ______ to be imposed on foreign goods sold below their cost of production when domestic producers are being hurt. a. voluntary export restraints b. quota rents c. local content requirements d. antidumping duties

d. antidumping duties

One purpose of the Smoot-Hawley Act, passed by the US Congress in 1930, was to a. minimize barriers to free trade. b. increase exports to foreign countries. c. encourage the purchase of inexpensive imports. d. avoid rising unemployment

d. avoid rising unemployment

According to Adam Smith's theory of absolute advantage, who benefits from engaging in trade? a. the importing country b. neither country, it is a zero-sum game c. the exporting country d. both countries engaging in a trade process

d. both countries engaging in a trade process

Porter argues that achieving international success in a certain industry is a function of factor endowments, domestic demand conditions, related and supported industries, and ______. a. government intervention b. host-country norms c. social hierarchies d. domestic rivalry

d. domestic rivalry

A consequence of subsidies paid to companies during difficult economic times -- for example, the Japanese farm subsidies -- is a. making it more difficult for recipient companies to find buyers. b. raising costs for recipients. c. making it more difficult for recipient companies to attract suppliers. d. giving recipients an unfair competitive advantage.

d. giving recipients an unfair competitive advantage.

The European Union's support for the Common Agricultural Policy illustrates why strategic trade policy is problematic. In this instance, the government was influenced by ______ to the detriment of consumers. a. start-ups b. foreign producers c. election fraud d. interest groups

d. interest groups

A government would impose administrative trade policies in order to a. foster goodwill among trading nations. b. ensure that there is sufficient supply of a good within a country. c. limit the amount of exports going out of a country. d. make it difficult for imports to enter a country.

d. make it difficult for imports to enter a country.

Governments occasionally protect certain industries, like defense-related industries, for ______ reasons. a. currency stabilization b. competitive advantage c. quality control d. national security

d. national security

Because of economies of scale, 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 is a reflection of _____. a. product life-cycle theory b. production possibilities frontier c. mercantilism d. new trade theory

d. new trade theory

Samuelson is concerned that advances in communications technology will result in the a. lack of entrepreneurial spirit. b. ultimate dynamic gains in global production. c. advancement of developing nations. d. offshoring of service jobs

d. offshoring of service jobs

The ethnocentric view that most new products are developed and introduced in the US is a key weakness in the ______ theory. a. new trade b. comparative advantage c. Heckscher-Ohlin d. product life-cycle

d. product life-cycle

The ______ shows the combination of goods and/or services that can be produced by a country based on available resources. a. mercantile theory b. absolute advantage c. comparative advantage d. production possibilities frontier

d. production possibilities frontier

Countries base the decision for intervention on ______ when protecting aerospace and semiconductor industries. a. protecting industries b. saving jobs c. protecting consumer interest d. protecting national security

d. protecting national security

According to the theory of international trade, it makes sense for a company to disperse its production to those countries where a. factors of endowment are lacking b. they can barter and trade goods c. offshoring service is available d. they can be performed most efficiently

d. they can be performed most efficiently

The Heckscher-Ohlin theory of international trade focuses on ______ when explaining what a country chooses to export.

factors of production

The final conclusion of the product life-cycle theory is that ultimately a product

may be exported back to the country where it was originally invented