Question 1

David Ricardo's theory of comparative advantage was the first to explain why unrestricted free trade is beneficial to a country.

Accepted Answer

A) True 
 B)False

Question 2

What is meant by the term free trade? Is free trade compatible with the concept of mercantilism?

Accepted Answer

Free trade refers to the absence of gove...

Question 3

Consider two countries Daria and Atlantis. Daria is a major producer of wheat and rice while Atlantis specializes in the production of fertilizers and manufacturing equipment. Engaging in free trade benefits both countries since Daria is an agrarian nation and Atlantis lacks arable land. This follows the theory of comparative advantage, and we can say that engaging in free trade benefits all countries that participate in it. Which of the following is an inaccurate assumption on which this conclusion is based?

Accepted Answer

A)  We have assumed a simple world in which there are only two countries.
B)  We have assumed the prices of resources and exchange rates in the two countries are dynamic.
C)  We have assumed there are barriers to the movement of resources from the production of one good to another within the same country.
D)  We have assumed that agrarian nations do not specialize in producing fertilizers.
E)  We have assumed diminishing returns to specialization.F) C) and D)
G) All of the above

Question 4

Which of the following advantages is most likely to be enjoyed by a company as a part of the first-mover advantages?

Accepted Answer

A)  Increasing returns to specialization
B)  A positive-sum game due to lack of competition
C)  The ability to capture scale economies ahead of later entrants
D)  Absolute advantage and higher efficiency
E)  The ability to specialize in the production of a particular productF) All of the above
G) None of the above

Question 5

Although mercantilism is an old and largely discredited doctrine, its echoes remain in modern political debate and in the trade policies of many countries.

Accepted Answer

A) True 
 B)False

Question 6

Which of the following theories supports government intervention and strategic trade policy?

Accepted Answer

A)  Theory of absolute advantage
B)  Theory of comparative advantage
C)  Heckscher-Ohlin theory
D)  New trade theory
E)  Poduct life-cycle theoryF) None of the above
G) B) and C)

Question 7

Which of the following is a result of certain products having small national markets, in the absence of trade?

Accepted Answer

A)  The variety of products available to consumers increases.
B)  Limited demand for such products leads to non-realization of economies of scale.
C)  Each nation will specialize in producing a narrower range of products than it would in the presence of trade.
D)  At low volumes of production, unit costs and prices would be lowered.
E)  The first movers in an industry may get a lock on the world market that discourages subsequent entry.F) B) and D)
G) C) and D)

Question 8

The new trade theory diverts from its advocacy of free trade by suggesting that:

Accepted Answer

A)  the price of a new product increases along with the increase in the popularity of the product.
B)  nations benefit from trade even in the absence of resource endowments and technology.
C)  there is an economic rationale for a proactive trade policy.
D)  the role of luck, entrepreneurship, and innovation is important in giving a firm first-mover advantages.
E)  market expansion leads to better realization of economies of scale.F) B) and D)
G) A) and D)

Question 9

Which of the following are unit cost reductions associated with a large scale of output?

Accepted Answer

A)  Comparative advantages
B)  Factor endowments
C)  Economies of scale
D)  Diminishing returns
E)  Absolute advantagesF) None of the above
G) B) and C)

Question 10

Describe the Leontief paradox.

Accepted Answer

Using the Heckscher-Ohlin theory, Leonti...

Question 11

The first theory of international trade that emerged in England asserted that gold and silver were the mainstays of national wealth and essential to vigorous commerce.

Accepted Answer

A) True 
 B)False

Question 12

Which of the following factor endowments would be classified as a basic factor by Michael Porter?

Accepted Answer

A)  Communication infrastructure
B)  Research facilities
C)  Natural resources
D)  Skilled labor
E)  Technological know-howF) A) and B)
G) C) and D)

Question 13

Which of the following theories states that in those industries where the output required to attain economies of scale represents a significant proportion of total world demand, the global market may be able to support only a small number of enterprises?

Accepted Answer

A)  Heckscher-Ohlin
B)  Comparative advantage
C)  Product life-cycle
D)  New trade
E)  Absolute advantageF) B) and E)
G) C) and D)

Question 14

Outline the relationship between economies of scale, first-mover advantages, and the pattern of trade as indicated by new trade theory.

Accepted Answer

One of the themes in new trade theory is...

Question 15

Which of the following is true of the relationship between trade and economic growth?

Accepted Answer

A)  Countries open to international trade display higher growth rates than those that close their economies to trade.
B)  Within a group of developing countries, closed economies grow faster than open economies.
C)  The Leontief paradox notes that adopting an open economy and embracing free trade does not reward a nation with higher economic growth.
D)  Free trade hampers economic growth and leads to lower living standards in the long run.
E)  Free trade has historically benefited poor counties and hence trade barriers should be introduced to protect rich countries from exploitation.F) A) and C)
G) All of the above

Question 16

A country has an absolute advantage in the production of a product when it is more efficient than any other country in producing it.

Accepted Answer

A) True 
 B)False

Question 17

Michael Porter argues that advanced factors are the most significant for competitive advantage.

Accepted Answer

A) True 
 B)False

Question 18

Which of the following statements best indicates Samuelson's criticism of free trade?

Accepted Answer

A)  Dynamic gains lead to a universally beneficial outcome for all countries.
B)  Offshoring service jobs that were traditionally mobile will increase the market clearing wage rate.
C)  Free trade has historically been beneficial only to developing countries.
D)  By importing cheap goods from a poor country a rich country may not be able to produce a net gain if the dynamic effect of free trade is to lower real wage rates in the rich country.
E)  Trade changes a country's stock of resources and the efficiency with which it utilizes those resources.F) C) and E)
G) D) and E)

Question 19

The Heckscher-Ohlin theory is the best predictor of real-world international trade patterns.

Accepted Answer

A) True 
 B)False

Question 20

According to Vernon, which of the following influences the movement of the locus of global production from advanced countries to developing countries?

Accepted Answer

A)  Cost considerations
B)  Factor endowments
C)  Domestic competition
D)  Supporting industries
E)  Firm structureF) A) and E)
G) All of the above

Exam 6: International Trade Theory

Although mercantilism is an old and largely discredited doctrine, its echoes remain in modern political debate and in the trade policies of many countries.

Correct Answer
verified

Which of the following is a result of certain products having small national markets, in the absence of trade?

Correct Answer
verified

Which of the following advantages is most likely to be enjoyed by a company as a part of the first-mover advantages?

Correct Answer
verified

The new trade theory diverts from its advocacy of free trade by suggesting that:

Correct Answer
verified

A country has an absolute advantage in the production of a product when it is more efficient than any other country in producing it.

Correct Answer
verified

Describe the Leontief paradox.

Correct Answer
verified
Using the Heckscher-Ohlin theory, Leonti...
View Answer

Which of the following statements best indicates Samuelson's criticism of free trade?

Correct Answer
verified

Which of the following theories states that in those industries where the output required to attain economies of scale represents a significant proportion of total world demand, the global market may be able to support only a small number of enterprises?

Correct Answer
verified

The Heckscher-Ohlin theory is the best predictor of real-world international trade patterns.

Correct Answer
verified

Outline the relationship between economies of scale, first-mover advantages, and the pattern of trade as indicated by new trade theory.

Correct Answer
verified
One of the themes in new trade theory is...
View Answer

According to Vernon, which of the following influences the movement of the locus of global production from advanced countries to developing countries?

Correct Answer
verified

Which of the following are unit cost reductions associated with a large scale of output?

Correct Answer
verified

Michael Porter argues that advanced factors are the most significant for competitive advantage.

Correct Answer
verified

Which of the following theories supports government intervention and strategic trade policy?

Correct Answer
verified

Which of the following is true of the relationship between trade and economic growth?

Correct Answer
verified

David Ricardo's theory of comparative advantage was the first to explain why unrestricted free trade is beneficial to a country.

Correct Answer
verified

Which of the following factor endowments would be classified as a basic factor by Michael Porter?

Correct Answer
verified

What is meant by the term free trade? Is free trade compatible with the concept of mercantilism?

Correct Answer
verified
Free trade refers to the absence of gove...
View Answer

Correct Answer
verified

The first theory of international trade that emerged in England asserted that gold and silver were the mainstays of national wealth and essential to vigorous commerce.

Correct Answer
verified

Exam 6: International Trade Theory

Although mercantilism is an old and largely discredited doctrine, its echoes remain in modern political debate and in the trade policies of many countries.

Correct AnswerverifiedShow Answer

Which of the following is a result of certain products having small national markets, in the absence of trade?

Correct AnswerverifiedShow Answer

Which of the following advantages is most likely to be enjoyed by a company as a part of the first-mover advantages?

Correct AnswerverifiedShow Answer

The new trade theory diverts from its advocacy of free trade by suggesting that:

Correct AnswerverifiedShow Answer

A country has an absolute advantage in the production of a product when it is more efficient than any other country in producing it.

Correct AnswerverifiedShow Answer

Describe the Leontief paradox.

Correct AnswerverifiedUsing the Heckscher-Ohlin theory, Leonti...View AnswerShow Answer

Which of the following statements best indicates Samuelson's criticism of free trade?

Correct AnswerverifiedShow Answer

Which of the following theories states that in those industries where the output required to attain economies of scale represents a significant proportion of total world demand, the global market may be able to support only a small number of enterprises?

Correct AnswerverifiedShow Answer

The Heckscher-Ohlin theory is the best predictor of real-world international trade patterns.

Correct AnswerverifiedShow Answer

Outline the relationship between economies of scale, first-mover advantages, and the pattern of trade as indicated by new trade theory.

Correct AnswerverifiedOne of the themes in new trade theory is...View AnswerShow Answer

According to Vernon, which of the following influences the movement of the locus of global production from advanced countries to developing countries?

Correct AnswerverifiedShow Answer

Which of the following are unit cost reductions associated with a large scale of output?

Correct AnswerverifiedShow Answer

Michael Porter argues that advanced factors are the most significant for competitive advantage.

Correct AnswerverifiedShow Answer

Which of the following theories supports government intervention and strategic trade policy?

Correct AnswerverifiedShow Answer

Which of the following is true of the relationship between trade and economic growth?

Correct AnswerverifiedShow Answer

David Ricardo's theory of comparative advantage was the first to explain why unrestricted free trade is beneficial to a country.

Correct AnswerverifiedShow Answer

Which of the following factor endowments would be classified as a basic factor by Michael Porter?

Correct AnswerverifiedShow Answer

What is meant by the term free trade? Is free trade compatible with the concept of mercantilism?

Correct AnswerverifiedFree trade refers to the absence of gove...View AnswerShow Answer

Correct AnswerverifiedShow Answer

The first theory of international trade that emerged in England asserted that gold and silver were the mainstays of national wealth and essential to vigorous commerce.

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
Using the Heckscher-Ohlin theory, Leonti...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
One of the themes in new trade theory is...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
Free trade refers to the absence of gove...
View Answer

Correct Answer
verified

Correct Answer
verified