International Trade

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

• comparative advantage

• mercantilism

• strategic trade

• national competitive advantage of industries

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

• Comparative advantage theory

• National competitive advantage of industries theory

• Product life cycle theory

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.

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

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

• 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 extent to which different countries possess various factors of production

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

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

-------- is the earliest theories on international trade.

• Comparative advantage

• Absolute Advantage

• Mercantilism

• Competitive advantage

Countries adopting mercantilism favor:

• trade deficit

• import more than export

• trade surplus

• budget surplus

The followings are true about Mercantilism EXCEPT:

• It believes that national prosperity is the result of a positive balance of trade.

• The mercantilist government see import as good and export as bad.

• It lead to a situation of zero sum game for some nations.

• Mercantilist countries colonized other countries to gain resources and market finished goods.