International Business - Chapter 5 - Trading Internationally
A theory that suggests that the competitive advantage of certain industries in different nations depends on four aspects that form a "diamond."
"Diamond" theory
Net losses that occur in an economy as a result of tariffs are called:
A deadweight cost
When a country financially subsidizes some of its own key manufacturers, this is an example of:
A nontariff barrier
When a country relies on tariffs to discourage imports, this is an example of:
A tariff barrier
Import tariff
A tax imposed on imports.
Product life cycle theory
A theory that accounts for changes in the patterns of trade over time by focusing on product life cycles.
Theory of comparative advantage
A theory that focuses on the relative (not absolute) advantage in one economic activity that one nation enjoys in comparison with other nations.
Theory of mercantilism
A theory that suggest that the wealth of the world is fixed and that a nation that exports more and imports less will be richer.
Factor endowment theory (Heckscher-Ohlin theory)
A theory that suggests that nations will develop comparative advantages based on their locally abundant factors.
Strategic trade theory
A theory that suggests that strategic intervention by governments in certain industries can enhance their odds for international success.
"Diamond" theory
A theory that suggests that the competitive advantage of certain industries in different nations depends on four aspects that form a "diamond".
Theory of national competitive advantage of industries
A theory that suggests that the competitive advantage of certain industries in different nations depends on four aspects that form a "diamond."
Theory of absolute advantage
A theory that suggests that under free trade, a nation gains by specializing in economic activities in which it has an absolute advantage.
The economic advantage one nation enjoys that is absolutely superior to other nations.
Absolute advantage
Bureaucratic rules that make it harder to import foreign goods.
Administrative policy
Trade surplus
An economic condition in which a nation exports more than it imports.
Trade deficit
An economic condition in which a nation imports more than it exports.
When a country imposes a tax on a good that is imported from another country, this is called:
An import tariff
Tariff levied on imports that have been "dumped" (selling below costs to "unfairly" drive domestic firms out of business).
Antidumping duty
Resource mobility
Assumption that a resource used in producing a product for one industry can be shifted and put to use in another industry.
The aggregating of importing and exporting that leads to the country-level trade surplus or deficit.
Balance of trade
First-mover advantage
Benefits that accrue to firms that enter the market first and that late entrants do not enjoy.
Administrative policy
Bureaucratic rules that make it harder to import foreign goods.
Import
Buying from abroad.
In 2013, which country led the world in merchandise exports?
China
The major theories of international trade that were advanced before the 20th century, which consist of (1) mercantilism, (2) absolute advantage, and (3) comparative advantage.
Classical trade theories
Opportunity cost
Cost of pursuing one activity at the expense of another activity, given the alternatives (other opportunities).
Net losses that occur in an economy as a result of tariffs.
Deadweight costs
Selling abroad.
Export
When a firm sells its products to a firm in a foreign country, this is an example of:
Exporting
A theory that suggests that nations will develop comparative advantages based on their locally abundant factors.
Factor endowment theory (Heckscher-Ohlin theory)
The extent to which different countries possess various factors of production such as labor, land, and technology.
Factor endowments
A trade deficit occurs when a country exports more merchandise than it imports.
False
In the past decade, world trade growth has always matched GDP growth every year.
False
When a country restrict the amount of goods that can be brought into the country, this is called an export quota.
False
Theory of national competitive advantage of industries ("Diamond" theory)
Firm strategy, structure, and rivalry. Domestic demand conditions. Related and supporting industries. Country factor endowments
Benefits that accrue to firms that enter the market first and that late entrants do not enjoy.
First-mover advantage
The idea that free market forces should determine how much to trade with little or no government intervention.
Free trade
Subsidy
Government payments to domestic firms.
Strategic trade policy
Government policy that provides companies a strategic advantage in international trade through subsidies and other supports.
According to the World Trade Organization, between 1993 and 2013 world trade:
Grew by an average of more than 5%
Buying from abroad.
Import
Restrictions on quantity of imports.
Import quotas
A tax imposed on imports.
Import tariff
The argument that if domestic firms are as young as "infants," in the absence of government intervention, they stand no chances of surviving and will be crushed by mature foreign rivals.
Infant industry argument
Services
Intangible offering being traded.
Voluntary export restraint (VER)
International agreements that show that exporting countries voluntarily agree to restrict their exports.
Requirement stipulating that a certain proportion of the value of the goods made in one country must originate from that country.
Local content requirements
Tangible products being traded.
Merchandise (goods)
The major theory of international trade that were advanced in the 20th century, which consist of (1) product life cycle, (2) strategic trade, (3) national competitive advantage of industries.
Modern trade theories
Deadweight cost
Net losses that occur in an economy as a result of tariffs.
Trade barriers that relies on non tariff means to discourage imports.
Nontariff barrier (NTB)
Cost of pursuing one activity at the expense of another activity, given the alternatives (other opportunities).
Opportunity cost
Trade embargo
Politically motivated trade sanctions against foreign countries to signal displeasure.
A theory that accounts for changes in the patterns of trade over time by focusing on product life cycles.
Product life cycle theory
The idea that governments should actively protect domestic industries form imports and vigorously promote exports.
Protectionism
Comparative advantage
Relative (not absolute) advantage in one economic activity that one nation enjoys in comparison with other nations.
Local content requirement
Requirement stipulating that a certain proportion of the value of the goods made in one country must originate from that country.
Assumption that a resource used in producing a product for one industry can shifted and put to use in another industry.
Resource mobility
Import quota
Restrictions on the quantity of imports.
Export
Selling abroad.
Intangible offering being traded.
Services
Government policy that provides companies a strategic advantage in international trade through subsidies and other supports.
Strategic trade policy
A theory that suggest that strategic intervention by governments in certain industries can enhance their odds for international success.
Strategic trade theory
Government payments to domestic firms.
Subsidy
Merchandise (goods)
Tangible products being traded.
Trade barrier that relies on tariffs to discourage imports.
Tariff barrier
Antidumping duty
Tariff levied on imports that have been "dumped" (selling below costs to "unfairly" drive domestic firms out of business).
Balance of trade
The aggregation of importing and exporting that leads to the country-level trade surplus or deficit.
Infant industry argument
The argument that if domestic firms are as young as "infants," in the absence of government intervention, they stand no chances of surviving and will be crushed by mature foreign rivals.
Absolute advantage
The economic advantage one nation enjoys that is absolutely superior to other nations.
Factor endowment
The extent to which different countries possess various factors of production such as labor, land, and technology.
Free trade
The idea that free market forces should determine how much to trade with little or no government intervention.
Protectionism
The idea that governments should actively protect domestic industries from imports and vigorously promote exports.
Classical trade theories
The major theories of international trade that were advanced before the 20th century, which consist of (1) mercantilism, (2), absolute advantage, and (3) comparative advantage.
Modern trade theories
The major theory of international trade that were advanced in the 20th century, which consist of (1) product life cycle, (2) strategic trade, and (3) national competitive advantage of industries.
A theory that suggests that under free trade, a nation gains by specializing in economic activities in which it has an absolute advantage.
Theory of absolute advantage
A theory that focuses on the relative (not absolute) advantage in one economic activity that one nation enjoys in comparison with other nations.
Theory of comparative advantage
A theory that suggest that the wealth of the world is fixed and that a nation that exports more and imports less will be richer.
Theory of mercantilism
A theory that suggests that the competitive advantage of certain industries in different nations depends on four aspects that form a "diamond"
Theory of national competitive advantage of industries
Nontariff barrier (NTB)
Trade barrier that relies on nontariff means to encourage imports.
Tariff barrier
Trade barrier that relies on tariffs to discourage imports.
An economic condition in which a nation imports more than it exports.
Trade deficit
Politically motivated trade sanctions against foreign countries to signal displeasure.
Trade embargos
An economic condition in which a nation exports more than it imports.
Trade surplus
A trade deficit occurs when a country imports more merchandise than it exports.
True
Between 1993 and 2013, world trade growth outpaced GDP growth each year.
True
The United States has the largest trade deficit in merchandise trade is combined with its surplus in service trade.
True
The theory of national competitive advantage of industries is also called the diamond theory.
True
When a firm sells its products to a firm in a foreign country, this is an example of exporting.
True
In 2013, which country led the world in merchandise imports?
United States
Which of the following countries has the largest trade deficit when its deficit in merchandise trade is combined with its surplus in service trade?
United States
International agreements that show that exporting countries voluntarily agree to restrict their exports.
Voluntary export restraint (VER)