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| 1.
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Mercantilism advocated that countries should simultaneously encourage exports and discourage imports. |
| | A) | True |
| | B) | False |
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| 2.
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There may be benefits to trade even for products a country can produce for itself. |
| | A) | True |
| | B) | False |
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| 3.
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New trade theory and Porter's theory of competitive advantage suggest that government intervention in the markets makes sense in certain situations. |
| | A) | True |
| | B) | False |
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| 4.
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Research has shown that countries that adopt an open economy and embrace free trade will enjoy higher economic growth rates. |
| | A) | True |
| | B) | False |
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| 5.
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According to Porter, there is a weak association between vigorous domestic rivalry and the creation and persistence of competitive advantage in an industry. |
| | A) | True |
| | B) | False |
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| 6.
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When a government does not attempt to influence through trade barriers what its citizens can buy from another country, or what they can sell to another country, the government is promoting |
| | A) | free trade |
| | B) | capitalism |
| | C) | mercantilism |
| | D) | ethnocentrism |
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| 7.
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According to _______, the invisible hand of the market mechanism should determine what a country imports and what it exports. |
| | A) | mercantilism |
| | B) | Porter |
| | C) | Smith |
| | D) | the Hecksher-Ohlin theory |
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| 8.
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Which of the following theories justifies limited government intervention in market. |
| | A) | new trade theory |
| | B) | theory of absolute advantage |
| | C) | theory of comparative advantage |
| | D) | Hecksher-Ohlin theory |
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| 9.
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All of the following except _______ suggest that governments should not intervene in the market. |
| | A) | theory of absolute advantage |
| | B) | Porter's theory of competitive advantage |
| | C) | theory of comparative advantage |
| | D) | Hecksher-Ohlin theory |
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| 10.
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If France is the most efficient producer of wine in the world, then France has |
| | A) | an absolute advantage in the production of wine |
| | B) | an absolute disadvantage in the production of wine |
| | C) | a comparative advantage in the production of wine |
| | D) | a comparative disadvantage in the production of wine |
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| 11.
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Hecksher and Ohlin examined ______ in their theory of why nations trade. |
| | A) | differences in labor productivity |
| | B) | differences in national factor endowments |
| | C) | differences in production levels |
| | D) | differences in trade barriers |
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| 12.
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Hecksher and Ohlin's theory focuses on |
| | A) | absolute differences in factor endowments |
| | B) | relative differences in factor endowments |
| | C) | absolute differences in productivity |
| | D) | relative differences in productivity |
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| 13.
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According to _________, over time, a country switches from being an exporter of a product to being an importer of the same product. |
| | A) | Ricardo |
| | B) | Hume |
| | C) | Samuelson |
| | D) | Vernon |
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| 14.
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The _________ suggests that trade is mutually beneficial because it allows for the specialization of production, the realization of scale economies, the production of a greater variety of products, and lower prices. |
| | A) | product life cycle theory |
| | B) | new trade theory |
| | C) | theory of competitive advantage |
| | D) | theory of comparative advantage |
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| 15.
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________ suggests that there may be an economic rationale for a proactive trade policy such as the provision of government subsidies to improve the chances for a company to succeed. |
| | A) | mercantilism |
| | B) | new trade theory |
| | C) | Vernon |
| | D) | Ricardo |
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| 16.
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_______ tried to explain why some nations succeed in certain industries while other nations do not. |
| | A) | Vernon |
| | B) | Krugman |
| | C) | Porter |
| | D) | Dunning |
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| 17.
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Porter argues that |
| | A) | the diamond is a mutually reinforcing system |
| | B) | government should not play a role in a nation's competitiveness |
| | C) | chance has little bearing on the success of a firm |
| | D) | factor endowments should be treated as a constant |
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| 18.
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Porter distinguishes between _______ factors. |
| | A) | known and unknown |
| | B) | natural and manmade |
| | C) | organized and relational |
| | D) | advanced and basic |
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| 19.
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Skilled labor, research facilities, and technological know-how are all examples of _______ in Porter's theory. |
| | A) | basic factors |
| | B) | manmade factors |
| | C) | advanced factors |
| | D) | relational factors |
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| 20.
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Two additional variables that affect Porter's diamond are |
| | A) | education and luck |
| | B) | investment and economic development |
| | C) | policy and human resources |
| | D) | chance and government |
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| 21.
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The conditions governing how companies are created, organized, and managed and the nature of domestic rivalry comprise which point on Porter's diamond? |
| | A) | demand conditions |
| | B) | firm strategy, structure, and rivalry |
| | C) | factor endowments |
| | D) | related and supporting industries |
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| 22.
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Porter argues that when a nation's consumers are ___________, a nation's firms gain competitive advantage over firms in nations where consumers are _________. |
| | A) | sophisticated and demanding, less sophisticated |
| | B) | unreliable, reliable |
| | C) | competitive and knowledgeable, sophisticated |
| | D) | reliable, knowledgeable |
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| 23.
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The knowledge that flows within Germany's textile and apparel sector is an example of _______ in Porter's model. |
| | A) | demand conditions |
| | B) | related and supporting industries |
| | C) | firm strategy, structure, and rivalry |
| | D) | factor endowments |
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| 24.
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Porter explains the U.S.' loss of competitiveness in engineering-based industries where manufacturing processes and product design issues are all-important as a consequence of |
| | A) | differing management ideologies |
| | B) | differing factor endowments |
| | C) | differing demand conditions |
| | D) | chance |
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| 25.
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Porter's theory has proven to be ________ of world trade patterns. |
| | A) | a powerful predictor |
| | B) | poor predictor |
| | C) | an unreliable predictor |
| | D) | an unknown predictor |
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