The International Trade Theories

The _____ theory viewed international trade as a zero-sum game.

• comparative advantage

• mercantilism

• strategic trade

• national competitive advantage of industries

Which of the following trade theories divides the nations of the world into three categories?

• National competitive advantage of industries

• Strategic trade

• Factor endowment

• Product life cycle

Which of the following was the first international trade theory to account for changes in the patterns of trade over time?

• Comparative advantage theory

• Absolute advantage theory

• Product life cycle theory

• Factor endowment theory

Which theory suggests that nations will develop comparative advantages based on their locally abundant factors?

• Heckscher-Ohlin theory

• Absolute advantage theory

• Comparative advantage theory

• Strategic trade theory

Which theory is based on the notion that competitive advantage is dependant on the four interacting aspects of factor endowments, domestic demand, firm strategy, and related and supporting industries?

• Strategic trade theory

• Product life cycle theory

• Comparative advantage theory

• National competitive advantage of industries theory

The theory of comparative advantage _____.

• reduces the wealth of the nation in the short run

• provides direct policy advice

• explains patterns of trade based on factor endowments

• was the first theory to incorporate dynamic changes in patterns of trade

Protectionism is similar to mercantilism as they both advocated _____.

• dividing the nations of the world into three categories based on its innovation capabilities

• developing comparative advantages based on a nation’s locally abundant factors

• specializing in economic activities in which a nation can have an absolute advantage

• government involvement in international trade

Which of the following ideas is closely linked to the theory of absolute advantage?

• All international trade must be closely regulated by governments.

• Free market forces should determine how much to trade with minimal government intervention.

• Governments should actively protect domestic industries from imports and vigorously promote exports.

• Nations should specialize in economic activities in which they have comparative advantage.

Which of the following is true of the absolute advantage theory of international trade?

• It emphasizes relative advantage in one economic activity that one nation enjoys in comparison with other nations.

• It divides the countries of the world into three categories based on innovation.

• It advocates extensive government intervention in international trade.

• It was the first theory that advocated free trade.

Factor endowment is _____.

• the amount of change that patterns of trade undergo over time

• the degree to which the government allows free trade to exist in its international trade

• the extent to which different countries possess various factors of production

• the cost of pursuing one activity at the expense of another given alternative activity