Chapter 5 Quiz

________ says that nations should accumulate financial wealth, usually in the form of gold, by encouraging exports and discouraging imports.

Mercantilism

Which of the following is an argument offered by the new trade theory?

There are gains to be made from specialization and increasing economies of scale.

When there are gains to be had by both countries that are party to an exchange, international trade is considered a(n) ________.

When there are gains to be had by both countries that are party to an exchange, international trade is considered a(n) ________.

Which factors of production did Leontief focus on?

Which factors of production did Leontief focus on?

The condition that results when a nation's exports are greater than its imports is called ________.

a trade surplus

Which theory suggests that a country should export those goods and services for which it is more productive than other countries and import those goods and services for which other countries are more productive?

absolute advantage

According to the theory of ________, trade is beneficial even if one country is less efficient in the production of two goods, as long as it is less inefficient in the production of one of the goods.

comparative advantage

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) ________.

comparative advantage

The ________ theory states that countries produce and export goods that require resources available in abundance and import goods that require resources in short supply.

factor proportions

According to mercantilism, the accumulation of national wealth depended on the ________.

increase in a nation's trade surplus

The ________ theory states that a country's export eventually becomes its import.

international product life cycle

During which stage of the international product life cycle theory does demand rise and remain sustained for a fairly lengthy period of time?

maturing product stage

Scenario: Better Mousetrap Inc.Better Mousetrap Inc. is a manufacturing company that sells pest control products. Recently the company launched an innovative mousetrap with a unique design that has been selling well in the U.S. market. Senior Vice President Marc Wallace, even recommended expanding sales overseas in order to increase company revenues. 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?

maturing product stage

Nations following the theory of ________ believed that the world's wealth was limited and that a nation could increase its share of the pie only at the expense of its neighbors.

mercantilism

The measures of a nation's well-being other than the financial wealth accumulated through exports are irrelevant according to ________.

mercantilism

The danger of trade dependency is that ________.

political turmoil in a country might affect all dependent countries

The focus of factor proportions theory is on the ________.

productivity of the production process

Scenario: Better Mousetrap Inc.Better Mousetrap Inc. is a manufacturing company that sells pest control products. Recently the company launched an innovative mousetrap with a unique design that has been selling well in the U.S. market. Senior Vice President Marc Wallace, even recommended expanding sales overseas in order to increase company revenues. Eventually, Wallace expects that domestic production of the mousetrap will cease altogether. This would happen in the ________ stage of the product life cycle. maturing product

standardized product

Factor proportions theory differs from the theory of comparative advantage in that the focus of factor proportions theory is on the ________.

usage of the most abundant factors of production, while the focus of the comparative advantage theory is on the productivity of the production process

The theory of absolute advantage destroys the mercantilist idea that international trade is a ________.

zero-sum game