Question 1

Explain the concept of free trade.

Accepted Answer

Free trade refers to a situation where a...

Question 2

What are the four attributes that are discussed in Porter's diamond?

Accepted Answer

The four factors are:
(1)Factor endowmen...

Question 3

The production possibility frontier will be parabolic if constant return to specialization is observed.

Accepted Answer

A) True 
 B)False

Question 4

Which of the following arguments supports the Paul Samuelson's critique?

Accepted Answer

A)   A rich country cannot produce net gains by engaging in free trade with a poor country.
B)   Governmental intervention will reduce the likeliness of countries' economic success.
C)   Countries should attempt to specialize in the production of goods and services.
D)   Trade is a positive-sum game in which all countries that participate realize economic gains.

Question 5

The product life-cycle theory argues that a large proportion of the world's new products had been developed by U.S.firms.

Accepted Answer

A) True 
 B)False

Question 6

Identify the theory that supports the view that in some cases countries export for the reason that the world market can support only a limited number of firms.

Accepted Answer

A)   Heckscher-Ohlin theory
B)   Smith's theory
C)   Ricardo's theory
D)   New trade theory

Question 7

According to Adam Smith,A country should specialize in the production of a good when it has _____.

Accepted Answer

A)   an absolute advantage in the production of the good
B)   a strong domestic demand for the good
C)   the ability to help country increase its national output
D)   the necessary raw materials for production

Question 8

Simple model of free trade assumed away transportation costs between countries.

Accepted Answer

A) True 
 B)False

Question 9

Which of the following theories suggests that first mover advantage is significant in the export of a good?

Accepted Answer

A)   Product life-cycle theory
B)   Ricardo's theory
C)   New trade theory
D)   Theory of comparative advantage

Question 10

Which of the following is a major disadvantage of the product life-cycle theory introduced by Vernon?

Accepted Answer

A)   The theory's arguments seem ethnocentric and increasingly dated.
B)   The theory failed to explain the dominance of developed nations.
C)   The theory applies only when a poor nation invents a new product.
D)   The theory cannot be used to explain the production of luxury products.

Question 11

Porter argues that a nation's firms gain competitive advantage if _____.

Accepted Answer

A)   their domestic consumers lack technical awareness
B)   they function in a labor intensive market
C)   the country has abundant supply of unskilled workers
D)   their domestic consumers are demanding

Question 12

Briefly explain Vernon's product life-cycle theory.

Accepted Answer

Vernon's theory was based on the observa...

Question 13

Which of the following terms refers to the extent to which a country is gifted with such resources as land,labor,and capital?

Accepted Answer

A)   Current accounts
B)   Factor endowments
C)   National balance
D)   National accounts

Question 14

Which of the following accounts records transactions that involve the purchase or sale of assets?

Accepted Answer

A)   Capital account
B)   Current account
C)   Principal account
D)   Financial account

Question 15

Identify a major disadvantage of the product life-cycle theory.

Accepted Answer

Viewed from an Asian or European perspec...

Question 16

Which of the following is the reason why most economists prefer Heckscher-Ohlin theory to Ricardo's theory?

Accepted Answer

A)   Heckscher-Ohlin stresses on the differences in productivity between nations.
B)   Ricardo's theory considers factor endowments to describe national competitiveness.
C)   Heckscher-Ohlin theory makes fewer simplifying assumptions.
D)   Ricardo's theory considers the law of marginal returns.

Question 17

Which of the following refers to a situation where a government does not attempt to influence through quotas or duties what its citizens can buy from another country?

Accepted Answer

A)   Economic patriotism
B)   Protectionism
C)   Free trade
D)   Offshoring

Question 18

Companies that trade small volumes of product can benefit from economies of scale.

Accepted Answer

A) True 
 B)False

Question 19

Wal-Mart makes bulk purchases from its vendors and hence it is able to get better deals than its competitors.This allows Wal-Mart to offer greater discounts to its customers.In this case,Wal-Mart benefits from _____.

Accepted Answer

A)   first mover advantage
B)   constant marginal returns
C)   economies of scale
D)   absolute advantage of production

Question 20

Variety of goods that a country can produce is limited by the size of the market in industries where economies of scale are important.

Accepted Answer

A) True 
 B)False

Exam 6: International Trade Theory

Which of the following theories suggests that first mover advantage is significant in the export of a good?

Correct AnswerverifiedShow Answer

Which of the following is the reason why most economists prefer Heckscher-Ohlin theory to Ricardo's theory?

Correct AnswerverifiedShow Answer

Identify the theory that supports the view that in some cases countries export for the reason that the world market can support only a limited number of firms.

Correct AnswerverifiedShow Answer

Which of the following accounts records transactions that involve the purchase or sale of assets?

Correct AnswerverifiedShow Answer

Which of the following arguments supports the Paul Samuelson's critique?

Correct AnswerverifiedShow Answer

Variety of goods that a country can produce is limited by the size of the market in industries where economies of scale are important.

Correct AnswerverifiedShow Answer

Briefly explain Vernon's product life-cycle theory.

Correct AnswerverifiedVernon's theory was based on the observa...View AnswerShow Answer

Explain the concept of free trade.

Correct AnswerverifiedFree trade refers to a situation where a...View AnswerShow Answer

Which of the following terms refers to the extent to which a country is gifted with such resources as land,labor,and capital?

Correct AnswerverifiedShow Answer

Companies that trade small volumes of product can benefit from economies of scale.

Correct AnswerverifiedShow Answer

According to Adam Smith,A country should specialize in the production of a good when it has _____.

Correct AnswerverifiedShow Answer

Which of the following is a major disadvantage of the product life-cycle theory introduced by Vernon?

Correct AnswerverifiedShow Answer

Identify a major disadvantage of the product life-cycle theory.

Correct AnswerverifiedViewed from an Asian or European perspec...View AnswerShow Answer

What are the four attributes that are discussed in Porter's diamond?

Correct AnswerverifiedThe four factors are:(1)Factor endowmen...View AnswerShow Answer

The product life-cycle theory argues that a large proportion of the world's new products had been developed by U.S.firms.

Correct AnswerverifiedShow Answer

Wal-Mart makes bulk purchases from its vendors and hence it is able to get better deals than its competitors.This allows Wal-Mart to offer greater discounts to its customers.In this case,Wal-Mart benefits from _____.

Correct AnswerverifiedShow Answer

The production possibility frontier will be parabolic if constant return to specialization is observed.

Correct AnswerverifiedShow Answer

Porter argues that a nation's firms gain competitive advantage if _____.

Correct AnswerverifiedShow Answer

Simple model of free trade assumed away transportation costs between countries.

Correct AnswerverifiedShow Answer

Which of the following refers to a situation where a government does not attempt to influence through quotas or duties what its citizens can buy from another country?

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
Vernon's theory was based on the observa...
View Answer

Correct Answer
verified
Free trade refers to a situation where a...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
Viewed from an Asian or European perspec...
View Answer

Correct Answer
verified
The four factors are:
(1)Factor endowmen...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified