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Exam 5: International Trade Theory

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Question 61

Multiple Choice

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Vernon argues that pioneering firms kept production facilities closer to the market and centers of decision making because:

A) of the uncertainty and risks inherent in introducing new products.
B) they believed that foreign production facilities were inferior in technical skills.
C) they believed that U.S.labor costs were much lower than those in foreign markets.
D) earlier U.S.governments were critical of outsourcing production to other countries.

E) All of the above
F) B) and D)

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Question 62

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According to Samuelson,the ability to offshore service jobs that traditionally were not internationally mobile,coupled with rapid advances in communications technology and the productivity of foreign labor due to better education have an effect on middle-class wages in the United States that can be similar to:

A) mass inward migration into the United States.
B) improvement in the standard of living in the United States.
C) better employability of United States labor.
D) a substantial hike in the market clearing wage rate.

E) C) and D)
F) A) and C)

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Question 63

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Which of the following is one of the unrealistic assumptions that the simple Ricardian model of comparative advantage used in the text is based on?

Ricardo's theory leads us to expect that despite the short-term adjustment costs associated with adopting a free trade regime,trade would seem to produce a greater economic growth and higher living standards in the long run.

The comparative advantage theory is considered to have ignored which of the following statements?

According to Adam Smith,market mechanism,rather than government policy,should determine a country's imports and exports.

Free trade refers to a situation where a government,through quotas or duties,attempts to influence what its citizens can buy from another country,or what they can produce and sell to another country.

Zero-sum game refers to a situation in which an economic gain by one country results in an economic loss by another.

Discuss the policy implications of Porter's theory of national competitive advantage.

If a national market is small,there may not be enough demand to enable producers to realize _____ for certain products.

Smith,Ricardo,and Heckscher-Ohlin suggest that a country's economy would gain only if its citizens buy products that are made in that country.

From a profit perspective based on the various international theories,how would a business go about choosing locations for its various productive activities?

The first theory of international trade that emerged in England asserted that gold and silver were the mainstays of national wealth and essential to vigorous commerce.

Porter argued that in terms of factor endowments,_____ factors are the most significant for competitive advantage.

According to the new trade theory,countries whose firms establish a(n) _____ advantage with regard to the production of a particular new product may subsequently dominate global trade in that product.

In his 1817 book entitled "Principles of Political Economy," _____ introduced the theory of comparative advantage.

The _____ theory states that in those industries where the output required to attain economies of scale represents a significant proportion of total world demand,the global market may be able to support only a small number of enterprises.

Historically,the product life-cycle theory seems to be an accurate explanation of:

_____ are unit cost reductions associated with a large scale of output.

Assuming a world without trade,in industries where economies of scale are important,both the variety of goods that a country can produce and the scale of production are limited by the _____.