Question 1

Ricardo's theory makes fewer simplifying assumptions compared to Heckscher-Ohlin theory.

Accepted Answer

A) True 
 B)False

Question 2

According to the new trade theory,firms that establish a first-mover advantage with regard to the production of a particular new product may subsequently dominate global trade in that product.

Accepted Answer

A) True 
 B)False

Question 3

Which of the following theories stress the role of luck,entrepreneurship,and innovation in the production and export of a good or service by the firms in a country?

Accepted Answer

A)   Product life-cycle theory
B)   Ricardo's theory
C)   Theory of comparative advantage
D)   New trade theoryE) A) and D)
F) B) and C)

Question 4

Explain how the theories of trade differ in terms of their support to governmental intervention.

Accepted Answer

The theories of Smith,Ricardo,and Heckscher-Ohlin form part of the case for unrestricted free trade.The argument for unrestricted free trade is that both import controls and export incentives (such as subsidies)are self-defeating and result in wasted resources.Both the new trade theory and Porter's theory of national competitive advantage can be interpreted as justifying some limited government intervention to support the development of certain export-oriented industries.

Question 5

Which of the following is a major flaw associated with mercantilism?

Accepted Answer

A)   Mercantilists do not support government intervention in trade.
B)   Mercantilists view trade as a zero-sum game.
C)   Mercantilists recommend policies to maximize imports.
D)   Mercantilists recommend countries to maintain a negative trade balance.E) C) and D)
F) A) and C) B

Question 6

Explain the dynamic gains that are generated by opening an economy to trade.

Accepted Answer

First,free trade might increase a countr...

Question 7

The Heckscher-Ohlin theory argues that the pattern of international trade is determined by differences in factor endowments.

Accepted Answer

A) True 
 B)False

Question 8

Which of the following is a statement that supports the theory of comparative advantage?

Accepted Answer

A)   International trade is a zero-sum gain where one nation's gain is another's loss.
B)   Domestic industries are at risk when a country engages in free trade.
C)   A country should maintain trade surplus to succeed in global trade.
D)   Global production is greater with free trade than it is with restricted trade.E) All of the above
F) A) and C)

Question 9

Porter's theory of national competitive advantage recommends unrestricted free trade between countries.

Accepted Answer

A) True 
 B)False

Question 10

What are the sources of economies of scale?

Accepted Answer

Economies of scale are unit cost reducti...

Question 11

David Ricardo's theory of comparative advantage explains international trade in terms of international differences in political environments.

Accepted Answer

A) True 
 B)False

Question 12

Explain how the principle of diminishing returns weakens the Ricardian model.

Accepted Answer

Diminishing returns show that it is not ...

Question 13

Which of the following is a major benefit of engaging in free trade?

Accepted Answer

A)   It helps to reduce the financial volatility in global markets.
B)   It helps the countries protect the jobs that are available to their citizens.
C)   It gives countries access to products that they cannot produce.
D)   It allows the governments to exert more control on businesses.E) B) and C)
F) A) and C) C

Question 14

New trade theory suggests that nations cannot benefit from trade when they do not differ in resource endowments or technology.

Accepted Answer

A) True 
 B)False

Question 15

Textile industry in a nation is characterized by vigorous domestic rivalry.Which of the following observations of this nation's international competency is most likely to be true?

Accepted Answer

A)   The nation will have access to such basic factors of textile industry as natural resources.
B)   The nation's textile firms will have a competitive advantage in international trade.
C)   The domestic customers of the textile firms will be less demanding.
D)   The nation's textile industry will lack the advanced factors that are necessary to be internationally competent.E) B) and C)
F) All of the above

Question 16

What are the assumptions that we make when we discuss a simple Ricardian model to support free trade?

Accepted Answer

1.We have assumed a simple world in whic...

Question 17

The theory of comparative advantage provides strong rationale for supporting the idea of _____.

Accepted Answer

A)   business nationalism
B)   free trade
C)   protectionism
D)   governmental intervention in tradeE) B) and D)
F) B) and C)

Question 18

Diminishing returns to specialization occurs when _____.

Accepted Answer

A)   each additional unit is produced with lesser number of laborers
B)   a nation's gross domestic product declines for a few years
C)   production possibility frontier appears as a rectangle
D)   more units of resources are required to produce each additional unitE) None of the above
F) A) and D)

Question 19

Which of the following terms refers to the unit cost reductions associated with large sized outputs?

Accepted Answer

A)   Absolute advantage of production
B)   Economies of scale
C)   Constant marginal returns
D)   Diminishing marginal returnsE) A) and D)
F) B) and D)

Question 20

Which of the following statements is true of the Leontief Paradox?

Accepted Answer

A)   It shows an anomaly that occurs when a nation has high domestic demand for a product.
B)   It explains the relationship between domestic demand and comparative advantage.
C)   It disproved Ricardo's theory of comparative advantage.
D)   It raised questions about the validity of the Heckscher-Ohlin theory.E) C) and D)
F) None of the above

Exam 6: International Trade Theory

Ricardo's theory makes fewer simplifying assumptions compared to Heckscher-Ohlin theory.

Correct Answer
verified

According to the new trade theory,firms that establish a first-mover advantage with regard to the production of a particular new product may subsequently dominate global trade in that product.

Correct Answer
verified

Which of the following theories stress the role of luck,entrepreneurship,and innovation in the production and export of a good or service by the firms in a country?

Correct Answer
verified

Explain how the theories of trade differ in terms of their support to governmental intervention.

Which of the following is a major flaw associated with mercantilism?

Correct Answer
verified
B

Explain the dynamic gains that are generated by opening an economy to trade.

Correct Answer
verified
First,free trade might increase a countr...
View Answer

The Heckscher-Ohlin theory argues that the pattern of international trade is determined by differences in factor endowments.

Correct Answer
verified

Which of the following is a statement that supports the theory of comparative advantage?

Correct Answer
verified

Porter's theory of national competitive advantage recommends unrestricted free trade between countries.

Correct Answer
verified

What are the sources of economies of scale?

Correct Answer
verified
Economies of scale are unit cost reducti...
View Answer

David Ricardo's theory of comparative advantage explains international trade in terms of international differences in political environments.

Correct Answer
verified

Explain how the principle of diminishing returns weakens the Ricardian model.

Correct Answer
verified
Diminishing returns show that it is not ...
View Answer

Which of the following is a major benefit of engaging in free trade?

Correct Answer
verified
C

New trade theory suggests that nations cannot benefit from trade when they do not differ in resource endowments or technology.

Correct Answer
verified

Textile industry in a nation is characterized by vigorous domestic rivalry.Which of the following observations of this nation's international competency is most likely to be true?

Correct Answer
verified

What are the assumptions that we make when we discuss a simple Ricardian model to support free trade?

Correct Answer
verified
1.We have assumed a simple world in whic...
View Answer

The theory of comparative advantage provides strong rationale for supporting the idea of _____.

Correct Answer
verified

Diminishing returns to specialization occurs when _____.

Correct Answer
verified

Which of the following terms refers to the unit cost reductions associated with large sized outputs?

Correct Answer
verified

Which of the following statements is true of the Leontief Paradox?

Correct Answer
verified

Exam 6: International Trade Theory

Ricardo's theory makes fewer simplifying assumptions compared to Heckscher-Ohlin theory.

Correct AnswerverifiedShow Answer

According to the new trade theory,firms that establish a first-mover advantage with regard to the production of a particular new product may subsequently dominate global trade in that product.

Correct AnswerverifiedShow Answer

Which of the following theories stress the role of luck,entrepreneurship,and innovation in the production and export of a good or service by the firms in a country?

Correct AnswerverifiedShow Answer

Explain how the theories of trade differ in terms of their support to governmental intervention.

Which of the following is a major flaw associated with mercantilism?

Correct AnswerverifiedB

Explain the dynamic gains that are generated by opening an economy to trade.

Correct AnswerverifiedFirst,free trade might increase a countr...View AnswerShow Answer

The Heckscher-Ohlin theory argues that the pattern of international trade is determined by differences in factor endowments.

Correct AnswerverifiedShow Answer

Which of the following is a statement that supports the theory of comparative advantage?

Correct AnswerverifiedShow Answer

Porter's theory of national competitive advantage recommends unrestricted free trade between countries.

Correct AnswerverifiedShow Answer

What are the sources of economies of scale?

Correct AnswerverifiedEconomies of scale are unit cost reducti...View AnswerShow Answer

David Ricardo's theory of comparative advantage explains international trade in terms of international differences in political environments.

Correct AnswerverifiedShow Answer

Explain how the principle of diminishing returns weakens the Ricardian model.

Correct AnswerverifiedDiminishing returns show that it is not ...View AnswerShow Answer

Which of the following is a major benefit of engaging in free trade?

Correct AnswerverifiedC

New trade theory suggests that nations cannot benefit from trade when they do not differ in resource endowments or technology.

Correct AnswerverifiedShow Answer

Textile industry in a nation is characterized by vigorous domestic rivalry.Which of the following observations of this nation's international competency is most likely to be true?

Correct AnswerverifiedShow Answer

What are the assumptions that we make when we discuss a simple Ricardian model to support free trade?

Correct Answerverified1.We have assumed a simple world in whic...View AnswerShow Answer

The theory of comparative advantage provides strong rationale for supporting the idea of _____.

Correct AnswerverifiedShow Answer

Diminishing returns to specialization occurs when _____.

Correct AnswerverifiedShow Answer

Which of the following terms refers to the unit cost reductions associated with large sized outputs?

Correct AnswerverifiedShow Answer

Which of the following statements is true of the Leontief Paradox?

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
B

Correct Answer
verified
First,free trade might increase a countr...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
Economies of scale are unit cost reducti...
View Answer

Correct Answer
verified

Correct Answer
verified
Diminishing returns show that it is not ...
View Answer

Correct Answer
verified
C

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
1.We have assumed a simple world in whic...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified