Mercantilism advocated that countries should simultaneously encourage exports and discourage imports.
Adam Smith and David Ricardo were able to demonstrate that international trade is fundamentally a zero-sum game.
Research has shown that countries that adopt an open economy and embrace free trade will enjoy higher economic growth rates.
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:
Although import controls may benefit _____________, the theories of Smith, Ricardo and Hecksher-Ohlin suggest that the economy as a whole is hurt by such actions.
|C)||producers or manufacturers|
In Adam Smith's theory of absolute advantage, he argues that __________________.
|A)||a country should never produce goods at home that it can buy at a lower cost from other countries|
|B)||import controls should be used to maintain an absolute advantage in domestic production|
|C)||the first mover advantage is the most important and therefore absolute|
|D)||a government should discourage imports and encourage exports|
In the theories of absolute and comparative advantage, trade ________________.
|A)||should only be conducted among developed nations until developing nations can build their infrastructure|
|B)||produces net gains for all involved|
|C)||should be closely regulated by the national government to ensure the security of the nation and the strategic advantages the country has developed|
|D)||is seen as less important than developing domestic industries|
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.|
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|
Economists prefer the ___________ on theoretical grounds although it is a poor predictor of real-world international trade patterns, and while the _______________ is regarded as too limited, it predicts trade patterns with greater accuracy.
|A)||theory of absolute advantage; theory of comparative advantage|
|B)||Smith's theory of absolute advantage; the Leontief Paradox|
|C)||mercantilism; Hecksher-Ohlin theory|
|D)||Hecksher-Ohlin theory; Ricardo's theory of competitive advantage|
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.|
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|
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.|
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.|
A firm can preempt available demand, gain cost advantages related to volume, build an enduring brand ahead of competitors and establish a long-term, sustainable competitive advantage by establishing a(n)_____________________.
|C)||first mover advantage|
|D)||factor endowment advantage|