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| 1 | |
Mercantilism advocated that countries should simultaneously encourage exports and discourage imports. |
| | A) | True |
| | B) | False |
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| 2 | |
There may be benefits to trade even for products a country can produce for itself. |
| | A) | True |
| | B) | False |
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| 3 | |
Adam Smith and David Ricardo were able to demonstrate that international trade is fundamentally a zero-sum game. |
| | A) | True |
| | B) | False |
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| 4 | |
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 | |
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 | |
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 | |
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 | |
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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| 9 | |
The theory of comparative advantage: |
| | A) | holds that it may make sense to purchase goods from another country even if your country can efficiently produce it. |
| | B) | repudiated Adam Smith's theory of absolute advantage |
| | C) | holds that in some cases it is better to restrict trade to gain a comparative advantage. |
| | D) | is no longer relevant in today's world because of the impact of the Internet. |
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| 10 | |
One of the weaknesses of the theory of comparative advantage is the number of assumptions that must be made. Which of the following is NOT one the important assumptions? |
| | A) | The theory is based on a simple world of only two countries. |
| | B) | The theory assumes transportation costs are included in the prices. |
| | C) | The theory assumes each country has a fixed stock of resources. |
| | D) | Income distribution within a country has no effect on trade. |
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| 11 | |
In the theory of comparative advantage, constant returns to specialization means units of resources remain constant. Diminishing returns to specialization means: |
| | A) | Fewer units of resources are required to produce each additional unit. |
| | B) | Resources are of the same quality, but how they are used affects production. |
| | C) | Different goods use resources in different proportions. |
| | D) | It is feasible for a country to specialize the way Ricardo proposed. |
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| 12 | |
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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| 13 | |
The Hecksher Ohlin theory: |
| | A) | is not particularly attractive to economists because of its complexity. |
| | B) | has been validated by the Leontief Paradox. |
| | C) | is a good predictor of trade patterns. |
| | D) | gains predictive power when the differences of technology on productivity is controlled for. |
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| 14 | |
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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| 15 | |
The product life-cycle theory: |
| | A) | continues to maintain its vitality into the 21st Century as new products are developed in the US. |
| | B) | seems ethnocentric as it assumes innovations and new products come from the US |
| | C) | has never been able to explain international trade patterns despite its intuitive appeal |
| | D) | is useful in marketing, but has no particular relevance to international trade theory. |
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| 16 | |
Economies of scale: |
| | A) | are unit cost reductions associated with a large scale of output. |
| | B) | are essential parts of both comparative advantage and product life-cycle theories |
| | C) | are useful to only a few large service companies. |
| | D) | makes no distinction between fixed and variable costs in globalization of production. |
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| 17 | |
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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| 18 | |
A theme in new trade theory is first mover advantage. This means: |
| | A) | companies with a solid exit strategy to move out of a market first will have a major advantage over time. |
| | B) | companies can gain an important political advantage by being the first to support emerging candidates and political parties. |
| | C) | companies have fewer risks by taking pioneering first steps before competition heats up. |
| | D) | companies may dominate exports of certain goods because they were the first to capture economies of scale. |
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| 19 | |
________ 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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| 20 | |
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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| 21 | |
Porter distinguishes between _______ factors. |
| | A) | known and unknown |
| | B) | natural and manmade |
| | C) | organized and relational |
| | D) | advanced and basic |
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| 22 | |
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 | |
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 | |
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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| 25 | |
Which of the following is NOT an important implication for international business of international trade theory? |
| | A) | It makes sense for a firm to disperse its productive activities to countries where they can be performed most efficiently. |
| | B) | It makes sense for the individual firm to invest substantial resources to build a first mover or early mover advantage. |
| | C) | Businesses can exert a strong influence on government trade policy so it is important to understand the theories of international trade. |
| | D) | Because of the many debates on international trade theory, it is generally wiser for a company to ignore international trade theory and focus on its own strategies and tactics. |
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