International Business - Chapter 5

Which of the following statements is incorrect with regard to the importance of colonies for mercantilist nations? A) They served as a source of military protection. B) They served as sources of inexpensive raw materials. C) They served as markets for higher-priced finished goods. D) They served as a source of profits for mercantilist powers.

A) They served as a source of military protection.

Which factors of production did Leontief focus on? A) capital and labor B) land and labor C) labor and technology D) land and technology

A) capital and labor

A majority of the total world merchandise trade occurs among ________. A) high-income economies B) newly industrialized countries C) emerging markets D) middle-income and low-income economies

A) high-income economies

Both absolute and comparative advantage theories assume that ________ is the only resource used in the production process. A) labor B) capital C) land D) equipment

A) labor

Scenario: Foodland and Drinkland Two countries, Foodland and Drinkland, produce food and drinks. In Foodland, one resource unit produces 20 tons of food and one resource unit produces 10 tons of drinks. In Drinkland, one resource unit produces 12 tons of food and one resource unit produces 24 tons of drinks. Food. Drinks Foodland. 20. 10 Drinkland. 12. 24 If these two countries were to gain from trading with each other, this would support the notion that trade is a ________. A) positive-sum game B) form of economic nationalism C) negative experience D) zero-sum game

A) positive-sum game

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. A) standardized product B) new product C) adapted product D) maturing product

A) standardized product

Which of the following is true about the theory of absolute advantage? A) The theory approves the objective of national governments to acquire wealth through restrictive trade policies. B) The theory emphasizes that nations should open their doors to trade so that people can obtain more goods at cheaper rates. C) The theory accepts the mercantilist idea that international trade is a zero-sum game. D) The theory measures a nation's wealth by how much gold and silver it has on reserve.

B) The theory emphasizes that nations should open their doors to trade so that people can obtain more goods at cheaper rates.

The ________ theory states that countries produce and export goods that require resources available in abundance and import goods that require resources in short supply. A) international product life cycle B) factor proportions C) new trade D) absolute advantage

B) factor proportions

Which of the following is an assumption made by the comparative advantage theory? A) government interference and control in trade activities B) maximization of production and consumption C) creation of trade surpluses D) creation of trade deficits

B) maximization of production and consumption

When there are gains to be had by both countries that are party to an exchange, international trade is considered a(n) ________. A) equal-sum game B) positive-sum game C) negative-sum game D) zero-sum game

B) positive-sum game

Which theory listed below is also called the Heckscher-Ohlin theory? A) relative advantage B) specialization of countries C) factor proportions theory D) comparative advantage

C) factor proportions theory

Most of the world merchandise trade is composed of trade in ________. A) agricultural products B) services C) manufactured goods D) minerals

C) manufactured goods

National competitive advantage theory states that a nation's competitiveness in an industry depends on ________. A) the capacity of companies to create barriers to entry B) the availability of cheap factors of production in the nation C) the capacity of the industry to innovate and upgrade D) the availability of government subsidies for industry development

C) the capacity of the industry to innovate and upgrade

Scenario: Foodland and Drinkland Two countries, Foodland and Drinkland, produce food and drinks. In Foodland, one resource unit produces 20 tons of food and one resource unit produces 10 tons of drinks. In Drinkland, one resource unit produces 12 tons of food and one resource unit produces 24 tons of drinks. FoodDrinks Foodland. 20. 10 Drinkland. 12. 24 Which of the following statements is true of the above scenario? A) Drinkland cannot trade with Foodland because trade is too expensive. B) Foodland has a comparative advantage in producing drinks. C) Foodland should stop producing food and just produce drinks. D) Drinkland has an absolute advantage in producing drinks.

D) Drinkland has an absolute advantage in producing drinks.

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. A) absolute advantage B) mercantilism C) factor proportions D) comparative advantage

D) comparative advantage

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. Jack has always handled product returns on a case-by-case basis, but he is often unprepared to deal with too many cases of returns. Which of the following would most likely help Jack increase his repeat business? A) avoiding receiving returns when possible to discourage the loss of revenue B) accepting returns but crediting customer accounts slowly to discourage future returns C) continuing with the current system, since it is already well-established D) planning for returns and giving prompt credits to customers

D) planning for returns and giving prompt credits to customers

Factor proportions theory states that factors in great supply relative to demand will be more costly than factors in short supply relative to demand. TRUE FALSE

FALSE

The theories of comparative and absolute advantage assume that specialization in the production of one particular good results in efficiency gains. TRUE FALSE

FALSE

According to Michael Porter, advanced factors account for the sustained competitive advantage a country enjoys in a product. TRUE FALSE

TRUE

The theory of absolute advantage destroys the mercantilist idea that international trade is a zero-sum game. TRUE FALSE

TRUE