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Exam 6: International Trade Theory

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Question 61

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The purpose of Porter's study of national competitive advantage was to

A) identify the various stages of the life cycle of a product.
B) determine why a country achieves international success in a particular industry.
C) determine how trade barriers affect the prices of products in the international market.
D) determine how pre-industrialization theories predict international trade patterns.
E) organize the relationship between factor endowments and economies of scale.

F) A) and B)
G) B) and E)

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Question 62

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Neo-mercantilists equate political power with economic power and economic power with

A) corruption.
B) a balance-of-trade surplus.
C) regional dominance.
D) a trade monopoly.
E) capitalism.

F) All of the above
G) A) and C)

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Question 63

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Raymond Vernon's product life-cycle theory was based on the observation that for most of the twentieth century a very large proportion of the world's new products were developed by the firms situated in Germany and sold first in the German market.

Which component of Porter's diamond is particularly important in shaping the attributes of domestically made products and in creating pressures for innovation and quality?

Which of the following helps a firm to preempt available demand, gain cost advantages related to volume, and build an enduring brand ahead of later competitors?

Discuss the two important points of new trade theory.

Nikoli lives in New Salom which specializes in component parts, while its geographical neighbor, Durma specializes in heavy machinery. New Salom exports component parts to Durma, which in turn exports heavy machinery to New Salom. According to the theory of comparative advantage, this mutually beneficial trade relationship best illustrates

Mercantilism, propagated in the sixteenth and seventeenth centuries, advocated that countries should discourage exports.

India is the largest exporter of information technology services to the United States In turn, the United States exported $3 billion worth of aircraft to India. What theory is illustrated by this form of trade between India and the United States?

Describe the Leontief paradox.

The Salcian government decides on the products that can be imported and ensures that any product that can be produced at home is not imported. Instead, the government wants to maximize exports to achieve a surplus in the balance of trade. Which perspective likely influences Salcia's approach to international trade?

In Lurnee, it takes 10 resources to produce 1 ton of cocoa and 13.5 resources to produce 1 ton of rice. In South Tyberg, it takes 40 resources to produce 1 ton of cocoa and 20 resources to produce 1 ton of rice. Lurnee has a comparative advantage over South Tyberg in cocoa. This follows the theory of comparative advantage, and we can say that engaging in free trade benefits all countries that participate in it; however, this conclusion stems from which of these inaccurate assumptions?

One reason used to explain the Leontief paradox observed in the case of the United States is that the United States

Free trade is likely to increase a country's stock of resources and the efficiency with which it utilizes those resources.

Consideration of competitors is taken into account in which attribute of Porter's diamond?

Sentoria is an island nation in the Pacific Ocean. Its geographical location is advantageous since it has access to a variety of aquatic life forms and also a number of freshwater sources that provide for fisheries. The lack of arable land drives local demand for seafood, and Sentoria is one of the world's major exporters of this product. Which theory of international trade best explains Sentoria's dominance as an exporter of seafood?

According to Michael Porter, government can influence each of the four components of Porter's diamond-either positively or negatively.

According to new trade theory, trade, through its impact on economies of scale, is most likely to

Paul Samuelson's critique of free trade is based on the idea that the wealthier nation in the trade agreement might not recognize a net gain if the trade creates

Many years ago, the Republic of Janua believed that it was in its best interests to maintain a trade surplus, to export more than it imports. In so doing, the Republic of Janua hoped to accumulate gold and silver, and consequently, increase its national wealth, prestige, and power. What influenced the Republic of Marunia's approach to international trade?