Module 2 learn smart

Which explanation suggests that countries will export products requiring large amounts of their abundant production factors and import products requiring large amounts of their scarce production factors?

Differences in resource endowments

Franz was happy to report to the management team that its larger production facility made it possible to increase the number of bicycles produced and also decrease the cost of each bicycle. Which theory explains this scenario?

Economies of scale

True or false: Doing business abroad with a nation's major trading partner is made easy by the fact that cultural objections are usually nonexistent.

False

______ includes both ownership and control of real or physical assets such as plants and other facilities.

Foreign direct investment

Which countries have consistently remained on the list of top 15 nations from which the United States imports for the past 50 years? (Check all that apply.)

Germany Japan United Kingdom Italy

Which of the following statements are accurate regarding an oligopolistic industry? (Check all that apply.)

Interdependence among firms increases the likelihood that firms will imitate their competition. It is an industry with a limited number of competing firms. The actions of one firm can strongly affect the performance of others in the industry.

Which of the following are true regarding foreign direct investment? (Check all that apply.)

It includes the control of real or physical assets. It includes the ownership of plants and other facilities. It includes the ownership of real or physical assets.

Which statements are accurate regarding mercantilism? (Check all that apply.)

It viewed precious metals such as gold and silver as the only source of wealth. It tended to create a trade surplus. It is a complex political and economic theory.

For which reasons are Mexico and Canada are major trading partners with the United States? (Check all that apply.)

Membership in USMCA Shorter delivery times Lower freight charges

Which statements are true regarding international trade? (Check all that apply.)

Nations should import goods for which they have a comparative disadvantage. International trade exists because firms export. Nations will attain a higher standard of living by specializing in goods for which they have a comparative advantage.

Which actions did the Trump Administration undertake to address U.S. trade deficits?

Renegotiated trade treaties Attempted to reduce trade imbalances with China Imposed tariffs

Select the benefits of doing business with major trading partners? (Check all that apply.)

Satisfactory transportation facilities are already established. The business climate is already relatively favorable. Currency from the foreign country is available to pay for the exports.

For which three reasons do firms tend to cluster together on a geographic basis?

Specialized local suppliers Pooling of a common labor force Shared technological information

Which of the following are reasons why many Asian countries are both import and export partners of the United States? (Check all that apply.)

They are purchasing large amounts of capital goods to further their industrial expansion. Their rising standards of living enable their people to afford more imported products. Their governments have been pressured by the U.S. government to lower their trade surplus.

A(n) oligopolistic industry has how many competing firms?

a limited number

Adam Smith argued that each nation should specialize in making those goods it can produce most efficiently—goods for which it has a(n) ______ advantage.

absolute

What situation exists when a nation can produce more of a good or service than another country for the same or lower cost of inputs?

absolute advantage

The amount invested each year into other countries is referred to as ______.

annual FDI outflow

Economist David Ricardo's idea of a comparative advantage is based on the idea that when two countries are involved in trade, ______.

both will benefit from trade

Today, which country is seen by many as the "fortress of mecantilism"?

china

Which nation ranks number one in exports of merchandise?

china

When one nation is less efficient than another in the production of two goods, the less efficient nation has a (n) Blank______ advantage in the production of that good for which its absolute disadvantage is less.

comparative

Canada is efficient at producing forestry and agricultural products, but cannot produce coffee as efficiently as some other nations. As such, Canada sells forestry and agricultural products to other countries and buys coffee. This is an example of ______.

comparative advantage

The purchase of an existing business in another nation is called ______.

cross-border acquisition

A trade_________is the amount by which the value of imports into a nation exceeds the value of its exports.

deficit

A nation can attempt to regain competitiveness in world markets through ____________ currency , which lowers the value of a nation's currency relative to other currencies and, as a result, lowers the prices of its exports.

devaluation

Currency______ lowers the value of a nation's currency relative to other currencies and therefore effectively lowers the prices of its exports.

devalutaion

The annual FDI investments going into (developed/developing) countries has been decreasing.

developed

The foreign investment component known as ______ requires investors to participate in the management of the firm.

direct investment

The ______ theory suggests that for a firm to be successful overseas, it must have ownership of unique knowledge or resources and be able to sustain them over time.

dynamic capability

Which theory is currently the most widely cited and accepted theory of foreign direct investment?

eclectic theory of international production

Which theory of FDI proposes an overall framework for explaining why firms choose to engage in FDI rather than serve foreign markets through alternatives such as exporting, licensing, or strategic alliances?

eclectic theory of international production

Which term means the predictable decline in the average cost of producing each unit of output as a production facility gets larger and output increases?

economies of scale

Perfect competition results in______. (Select all that apply.)

efficient allocation of products efficient production

Mercantilism advocated that countries should simultaneously ______ exports and ______ imports.

encourage; discourage

The rate __________is used to convert from foreign currency to domestic currency. (Enter one word in each blank.)

exchange

The price of one currency stated in term of another currency is called the ______.

exchange rate

After its first two years in business, Lennart's company realized that by purchasing component parts from Indonesia, it could save 12% in the final cost of goods. Lennart's company was able to improve its efficiency based on the knowledge it gained during its first two years in business. This example demonstrates the idea of the Blank______

experience curve

The ______ refers to the rising scale on which efficiency improves as a result of cumulative experience and learning.

experience curve

Which variable in Michael Porter's diamond model distinguishes between land, location, or natural resources and transportation systems or university research institutes?

factor conditions

What are the four variables in Michael Porter's diamond model of national advantage?

factor conditions related and supporting industries demand conditions firm strategy, structure, and rivalry

True or false: Historically, after firms have engaged in foreign direct investment, then they will start to engage in foreign trade.

false

True or false: Nations should import goods for which they have a comparative advantage.

false

True or false: Two-thirds of the value of corporate investments made in the United States from abroad has been spent establishing new businesses.

false

Although the mercantilist era ended, we still define a(n) Blank______ trade balance to mean that a nation exports more goods and services than it import

favorable

Of the following, which is NOT contributing to increases in foreign direct investment?

fewer international trade agreements

Select the reasons why foreign direct investment in the United States has focused on the acquisition of existing companies rather than new ones. (Check all that apply.)

greater success with a known brand name corporate restructuring rapid access to U.S. technology

A _______investment is the establishment of new facilities from the ground up.

greenfield

The dynamic capability theory suggests that in order for an international foreign direct investment to be successful, the firm must Blank______. (Check all that apply.)

have the ability to dynamically create, sustain, and exploit the capability over time have ownership of unique knowledge and resources have the ability to transfer the capability to international environments in order to produce a competitive advantage

The greatest usefulness of the international product life cycle theory in explaining trade comes when companies introduce their new products into (international/home) markets first.

home

As a result of their continued economic development, developing countries have dramatically (increased/decreased) their share of FDI stock.

increased

The initial stage of the international product life cycle is _____.

innovation

Which FDI theory suggests that due to high transaction costs, a firm may obtain a better price by using the superior knowledge itself than by selling the knowledge on the open market?

internalization theory

After analyzing which nations account for the most exports and imports, it is evident that international trade Blank

is unevenly distributed across the world

Companies often start with foreign trade prior to foreign direct investment, because foreign trade is Blank______. (Check all that apply.)

less costly less risky

What percentage of exports from developed economies go to other industrialized nations?

less than half

For a firm to have a -specific advantage overseas, the foreign market must have specific economic, social, or political characteristics.

location

is an economic philosophy based on the belief that a nation's wealth depends on accumulated treasure and to increase wealth, government policies should promote exports and discourage imports

mercantilism

Which theory suggests that foreign direct investment is made by firms in industries with relatively few competitors, due to their possession of technical and other advantages over indigenous firms?

monopolistic advantage theory

What are three basic types of tangible and intangible ownership-specific advantages?

monopolistic advantages economies of scale or scope knowledge or technology

According to economist Alfred Marshall, firms that cluster together on a geographic basis can achieve ________competitiveness.

national

Which of the following are contributing to increases in foreign direct investment? (Check all that apply.)

new production and communication technologies increased competition from globalizing firms fewer government barriers to trade

The strategic behavior theory suggests that strategic rivalry between firms in a(n) ______ industry will result in firms closely following and imitating each other's international investments in order to keep a competitor from gaining an advantage.

olipolistic

The theory of __________________argues for the existence of similar preferences and demand for products and services among nations with similar levels of per capita income.

overlapping demand

Which advantage of the eclectic theory of international production suggests that a firm has or can develop a firm-specific advantage through ownership of tangible and intangible assets that are not available to other firms and that can be transferred abroad?

ownership-specific advantage

______________ competition is the market situation in which there is a sufficiently large number of well-informed buyers and sellers of a homogeneous product such that no individual participant has enough power to determine the price of the product.

perfect

_______________competition is the market situation in which there is a sufficiently large number of well-informed buyers and sellers of a homogeneous product such that no individual participant has enough power to determine the price of the product.

perfect

Deals that do not result in the foreign investor's obtaining at least 10 percent of the shareholdings are classified as ______ investments.

portfolio

With______, investors are not directly concerned with the control of a firm, they still invest immense amounts in stocks and bonds from other countries.

portfolio investment

In balance-of-payments accounting, an export that brings money to the country is called ______, but imports that cause monetary outflows are labeled ______.

positive; negative

According to the economic theory of mercantilism, the only source of wealth was ______.

precious metals

The idea that a denim manufacturer in the United States can export its products to China while at the same time a Chinese manufacturer in the denim market can export to the United States because each of the product lines has unique qualities demonstrates the idea of ________

product differentiation

The unique differences that producers build into their products with the intention of influencing demand is called_____.

product differentiation

The land, labor, capital, and related production factors that a nation possesses are called______.

resource endowments

In the last 20 years, trade in ______ has experienced the fastest growth.

services

In the last 20 years, trade in______ has experienced the fastest growth.

services

If Indonesia can produce more clothing products than the United States and can do so for a lower cost, then Indonesia is said to have a(n) _________ advantage.

similar income per capita similar demand

Which of the following industries are examples of the monopolistic advantage theory? (Check all that apply.)

smartphones commercial aircraft manufacturers

For a firm to have a location-specific advantage overseas, the foreign market must have specific ______ characteristics. (Check all that apply.)

social political economic

Which theory suggests that strategic rivalry between firms in an oligopolistic industry will result in firms closely following and imitating each other's international investments in order to keep a competitor from gaining an advantage?

strategic behavior theory

A trade ____________ is the amount by which the value of a nation's exports exceeds the value of its imports.

surplus

A trade is the amount by which the value of imports into a nation exceeds the value of its exports.

the less efficient nation is not equally less efficient in the production of both goods

According to British economist David Ricardo, when one country has an absolute advantage over another in the production of two different goods, trade can still be a positive-sum game provided that _____.

the less efficient nation is not equally less efficient in the production of both goods

The book value of all foreign direct investment refers to the value of the _____.

total outstanding stock

The substantial increase in portfolio investments from people residing outside the United States is due to the large number and scale of acquisitions of U.S. companies by foreign companies.

true

True or False: The substantial increase in portfolio investments from people residing outside the United States is due to the large number and scale of acquisitions of U.S. companies by foreign companies.

true

True or false: The international product life cycle theory is demonstrated by the fact that personal computers were initially introduced in the United States but over time their production has moved overseas and they are now imported into the United States.

true

Which three mercantilist policies are currently being practiced in China, thus giving price advantages to Chinese companies?

undervalued currency export subsidies lax regulatory oversight

World trade tends to be dominated by exchanges ______ geographic regions.

within

Which country has become the world's largest exporter?

China

Place the stages of the international product life cycle (IPLC) in the correct order from first to last. Note: the first stage should be at the top of your list.

1. US exports 2. foreign production 3. foreign competition in export markets 4. import competition in US markets

What percentage of exports from developing nations went to developed countries in 2019?

43%

Approximately what percentage of global output is destined for international trade?

60%

The top 10 trading partners of the United States accounted for Blank______ of total U.S. exports in 2019.

64%

Which of the following assumptions must be present when arguing the internalization theory?

A firm must have superior knowledge over its competitors.

Although trade has increased globally, the proportion of world trade coming from which of the following regions has actually decreased since 1980? (Check all that apply.)

Africa North America Middle East