Chapter 6 Questions

A country has an absolute advantage in the production of a product when it _________. A) Has the capability to produce the product within its boundaries B) Is more efficient than any other country in producing it C) Has the largest domestic demand for the product D) Has access to the raw materials needed to produce the product

B) Is more efficient than any other country in producing it

A country's balance of payments accounts keep track of the ______. A) Basic factor endowments and advanced factor endowments that the nation possess B) Payments to and receipts from other counties for a particular time period C) Income taxes paid by domestic firms and the spending on the firms D) Total value of taxes paid by domestic firms an the spending on the firms

B) Payments to and receipts from other countries for a particular time period

According to Ricardo's theory of comparative advantage, a country should produce goods _____ A) For which it has access to raw materials B) That it produces most effieciently C) That have the highest domestic demand D) For which it has an absolute advantage

B) That it produces most efficiently

Which of the following is a theory that can be used t justify limited government intervention to support the development of certain export-oriented industries? A) Comparative advantage theory B) Ricardo's theory C) New trade theory D) Heckscher-Ohlin theory

C) New trade theory

Which of the following theories suggests that first mover advantage is significant in the export of a good? A) Product life cycle theory B) Ricardo's theory C) New trade theory D) Theory of comparative advantage

C) New trade theory

Which of the following factors according to Porter's national Diamond, is most likely to give a country competitive advantage over another country? A) Natural resources B) Climate C) Skilled labor D) Demographics

C) Skilled labor

If foreigners suddenly reduced their investments in the United States, what would happen? A) The value of the dollar on foreign exchange markets would increase B) The action would have no impact on the US economy C) The foreigners would sell US dollars for another currency D) The price of US exports would increase

C) The foreigners would sell US dollars for another currency

What will happen, according to Paul Samuelson's critique, if a rich country enters into a free trade agreement with a poor country? A) Both the countries will incur losses due to the exchanges between them B) The productivity of the poor country will decline rapidly C) The poor country will rapidly improve its productivity D) Both the countries will garner benefits from the exchanges between them

C) The poor country will rapidly improve its productivity

Which of the following accounts records transactions that involve the purchase or sale of assets? A) Capital account B) Current account C) Principal account D) Financial account

D) Financial account

Which of the following theories stress the role of luck, entrepreneurship, and innovation in the production and export of a good or service by the firms in a country? A) Product life cycle theory B) Ricardo's theory C) Theory of comparative advantage D) New trade theory

D) New trade theory