Chapter 3: International Trade & Investment Theory

The theory of ________ maintains that a country's wealth is measured by its holdings of gold and silver.

• mercantilism

• neomercantilism

• competitive advantage

• comparative advantage

According to mercantilism, what should a country's primary goal be?

• protecting citizens from unfair labor practices

• encouraging imports to prevent resource depletion

• promoting exports to enlarge gold and silver holdings

• ensuring sufficient labor for low-wage jobs in the textile industry

Mercantilism ________.

• suggests that a country should export those goods for which it is more productive than other countries and trade for those goods for which other countries are more productive

• maintains that a country's wealth is measured by its holdings of gold and silver

• suggests that a country will have a comparative advantage in producing products that intensively use resources it has in abundance

• argues that most trade in manufactured goods should be between countries with similar per capita incomes

Which theory suggests that a country should export those goods and services for which it is more productive than other countries and import those goods and services for which other countries are more productive?

• mercantilism

• comparative advantage

• absolute advantage

• specialization of countries

The primary flaw in the theory of absolute advantage is that the theory ________.

• confuses the acquisition of treasure with the acquisition of wealth

• looks only at relative productivity differences rather than competitive differences

• suggests that no trade will occur when one country has an absolute advantage in multiple products

• incorporates the concept of opportunity cost in determining which goods a country should produce

Which theory suggests that a country should produce and export those goods and services for which it is relatively more productive than other countries and import those goods and services for which other countries are relatively more productive?

• relative advantage

• comparative advantage

• absolute advantage

• specialization of countries

The ________ of a good is the value of what is given up to get the good.

• relative cost

• opportunity cost

• absolute cost

• discount cost

Which theory listed below is also called the Heckscher-Ohlin theory?

• relative advantage

• comparative advantage

• relative factor endowments

• specialization of countries

Japan exports Toshiba Computers to the United States, and the United States exports Apple Computers to Japan. This is an example of ________.

• mercantilism

• diversification

• interindustry trade

• intraindustry trade

Saudi Arabia has large crude oil reserves, and Bangladesh has a large pool of skilled workers. These are both examples of ________.

• factor endowments

• economies of scope

• production factors

• opportunity costs