International Business - Chapter 5

Who proposed the theory of absolute advantage? A) Adam Smith B) David Ricardo C) Bertil Ohlin D) Raymond Vernon

A) Adam Smith

The theory of comparative advantage was proposed by ________. A) David Ricardo B) Bertil Ohlin C) Raymond Vernon D) Adam Smith

A) David Ricardo

International trade is the purchase, sale, or exchange of goods and services across national borders. TRUE FALSE

TRUE

The importance of trade for a nation can be measured by ________. A) examining the volume of its trade relative to its total output B) the number of acquired territories the nation has that serves as sources of inexpensive raw materials C) the living standards of people involved in only trade activities D) examining the amount of wealth acquired by the national government through restrictive trade policies

A) examining the volume of its trade relative to its total output

Which of the following is an argument offered by the new trade theory? A) It is in line with the factor proportions theory. B) There are gains to be made from specialization and increasing economies of scale. C) The companies first to market forgo the opportunities to create barriers to entry. D) Market forces alone play a role in assisting the home companies in a country.

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

The international product life cycle theory was put forth for ________. A) service goods B) manufactured goods C) abundant resources D) natural resources

B) manufactured goods

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? A) new product stage B) maturing product stage C) standardized product stage D) product decline stage

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

B) mercantilism

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? A) comparative advantage B) specialization of countries C) absolute advantage D) mercantilism

C) absolute advantage

During which of the following stages of the international product life cycle theory does high purchasing power and buyer demand in an industrialized nation encourage a company to design and introduce a product concept? A) product decline stage B) standardized product stage C) new product stage D) maturing product stage

C) new product stage

Much production in the world today closely resembles what is predicted by the ________. A) new trade theory B) theory of factor proportions C) theory of comparative advantage D) international product life cycle

C) theory of comparative advantage

The condition that results when a nation's exports are greater than its imports is called ________. A) dumping B) mercantilism C) a trade deficit D) a trade surplus

D) a trade surplus

According to mercantilism, the accumulation of national wealth depended on the ________. A) expansion of a nation's total volume of trade B) increase in a nation's trade deficit C) expansion of a nation's total value of trade D) increase in a nation's trade surplus

D) increase in a nation's trade surplus

The term ________ refers to the voluntary exchange of goods, services, assets, or money between one person or organization and another across national borders. A) sales B) transaction C) strategic management D) international trade

D) international trade

During which stage of the international product life cycle theory does demand rise and remain sustained for a fairly lengthy period of time? A) product decline stage B) new product stage C) standardized product stage D) maturing product stage

D) maturing product stage

One of the major pillars upon which the practice of mercantilism rested was ________. A) excessive imports B) economies of scale C) pricing mechanism D) trade surpluses

D) trade surpluses

The theory of absolute advantage destroys the mercantilist idea that international trade is a ________. A) positive-sum game B) win-win game C) negative-sum game D) zero-sum game

D) zero-sum game

Companies that belong to a nation's internationally competitive industries exist in isolation from supporting industries. TRUE FALSE

FALSE

Mercantilism views competition for the world's wealth as a positive-sum game. TRUE FALSE

FALSE

The value of trade passing through the borders of all countries always exceeds the amount of goods and services they produce. TRUE FALSE

FALSE