Which of the following is the main principle of mercantilism?

D. It is in a country's best interests to maintain a trade surplus.

A. Protection of domestic industries is not essential for a nation's welfare.

B. Government intervention is not required in global trade.

C. Countries should encourage absolute free trade.

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

B. Mercantilists view trade as a zero-sum game.

A. Mercantilists do not support government intervention in trade.

C. Mercantilists recommend policies to maximize imports.

D. Mercantilists recommend countries to maintain a negative trade balance.

A country has an absolute advantage in the production of a product when it _____.

B. is more efficient than any other country in producing it

A. has the capability to produce the product within its boundaries

C. has the largest domestic demand for the product

D. has access to the raw materials needed to produce the product

According to Adam Smith, a country should specialize in the production of a good when it has _____.

C. the ability to help country increase its national output

A. an absolute advantage in the production of the good

B. a strong domestic demand for the good

D. the necessary raw materials for production

Country A can produce product X, but it can also buy it at a cheap rate from Country B. Which of the following courses of action is suitable in this situation according to Adam Smith's theory of absolute advantage?

A. Country A should import product X from country B and it should not attempt to produce it at home.

B. Country A should partly import the product and produce it domestically.

C. Country A should produce more of product X and should attempt to obtain an absolute advantage for the product.

D. Country A should subsidize the production of product X to obtain an absolute advantage over country B.

According to Ricardo's theory of comparative advantage, a country should produce goods _____.

B. that it produces most efficiently

A. for which it has access to raw materials

C. that have the highest domestic demand

D. for which it has an absolute advantage

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

D. Global production is greater with free trade than it is with restricted trade.

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.

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

D. governmental intervention in trade

Diminishing returns to specialization occurs when _____.

D. more units of resources are required to produce each additional unit

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

Which of the following is a major limitation of the simple Ricardian model of comparative advantage?

A. The model ignores the principle of diminishing marginal returns.

B. The model recommends excessive governmental intervention in trade.

C. The outcome of the model suggested by Ricardo is a zero-sum game.

D. The model is against the idea of engaging in free trade with nations.

What will happen, according to Paul Samuelson's critique, if a rich country enters into a free trade agreement with a poor country?

D. Both the countries will garner benefits from the exchanges between them.

A. Both the countries will incur losses due to the exchanges between them.

B. The productivity of the poor country will decline rapidly.

C. The poor country will rapidly improve its productivity.

Which of the following arguments supports the Paul Samuelson's critique?

A. A rich country cannot produce net gains by engaging in free trade with a poor country.

B. Governmental intervention will reduce the likeliness of countries' economic success.

C. Countries should attempt to specialize in the production of goods and services.

D. Trade is a positive-sum game in which all countries that participate realize economic gains.

Identify the theory that predicts that countries will export those goods that make intensive use of factors that are locally abundant.

A. Theory of comparative advantage

Which of the following is the reason why most economists prefer Heckscher-Ohlin theory to Ricardo's theory?

A. Heckscher-Ohlin stresses on the differences in productivity between nations.

C. Heckscher-Ohlin theory makes fewer simplifying assumptions.

B. Ricardo's theory considers factor endowments to describe national competitiveness.

D. Ricardo's theory considers the law of marginal returns.

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

D. It raised questions about the validity of the Heckscher-Ohlin theory.

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.

Country X, a poor country, invents a revolutionary electronic product. The country markets this new product in other poor countries to garner large profits. This occurrence is against the idea of _____.

D. Theory of comparative advantage

C. Theory of absolute advantage

Which of the following is a major disadvantage of the product life-cycle theory introduced by Vernon?

C. The theory applies only when a poor nation invents a new product.

A. The theory's arguments seem ethnocentric and increasingly dated.

B. The theory failed to explain the dominance of developed nations.

D. The theory cannot be used to explain the production of luxury products.

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

A. Absolute advantage of production

D. Diminishing marginal returns

Wal-Mart makes bulk purchases from its vendors and hence it is able to get better deals than its competitors. This allows Wal-Mart to offer greater discounts to its customers. In this case, Wal-Mart benefits from _____.

D. Absolute advantage of production

Company A entered the production of office software before its competitors. Because of this, the company's products are more familiar among and favored by customers. This situation exemplifies the _____.

B. Diminishing marginal returns

Which of the following theories suggests that first mover advantage is significant in the export of a good?

D. Theory of comparative advantage

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?

C. Theory of comparative advantage

Which of the following is an example of a basic factor that a nation will possess as proposed by Porter?

A. Communication infrastructure

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?

B. The nation's textile firms will have a competitive advantage in international trade.

A. The nation will have access to such basic factors of textile industry as natural resources.

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.

A country's balance-of-payments accounts keep track of the _____.

B. payments to and receipts from other countries for a particular time period

A. basic factor endowments and advanced factor endowments that the nation possesses

C. income taxes paid by domestic firms and the spending on the firms

D. total value of taxes paid by domestic firms and the spending on the firms

International Business_Chapter 6

Authored by Trần Kha

Social Studies

University

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39 questions

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MULTIPLE CHOICE QUESTION

30 sec • 1 pt

Which of the following refers to a situation where a government does not attempt to influence through quotas or duties what its citizens can buy from another country?

A. Economic patriotism

B. Protectionism

C. Free trade

D. Offshoring

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

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

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.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

David Ricardo's theory of comparative advantage explains global trade in terms of the _____.

A. first mover advantage that certain countries and firms enjoy

B. geographical differences between various countries

C. international differences in labor productivity

D. late mover advantage that certain countries and firms possess

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

Which of the following theories emphasizes the interplay between the proportions in which the factors of production are available in different countries and the proportions in which they are needed for producing particular goods?

A. Porter's theory

B. Smith's theory

C. Ricardo's theory

D. Heckscher-Ohlin theory

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

Identify the theory that supports the view that in some cases countries export for the reason that the world market can support only a limited number of firms.

A. Heckscher-Ohlin theory

B. Smith's theory

C. Ricardo's theory

D. New trade theory

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

Country A exports electronic goods from Country B although there are no underlying differences in factor endowments between the two countries. Which of the following theories explains this anomaly?

A. Comparative advantage theory

B. New trade theory

C. Ricardo's theory

D. Smith's theory

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

Which of the following observations is consistent with Michael Porter's theory of national competitive advantage?

A. Factors such as domestic demand and domestic rivalry determine nations' dominance on production.

B. Countries should produce only those goods for which they have a comparative advantage.

C. Interplay between the factors of production cause international marketing decisions.

D. International differences in labor productivity determine nations' supremacy in production.

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International Business_Chapter 6

Which of the following refers to a situation where a government does not attempt to influence through quotas or duties what its citizens can buy from another country?

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

David Ricardo's theory of comparative advantage explains global trade in terms of the _____.

Which of the following theories emphasizes the interplay between the proportions in which the factors of production are available in different countries and the proportions in which they are needed for producing particular goods?

Identify the theory that supports the view that in some cases countries export for the reason that the world market can support only a limited number of firms.

Country A exports electronic goods from Country B although there are no underlying differences in factor endowments between the two countries. Which of the following theories explains this anomaly?

Which of the following observations is consistent with Michael Porter's theory of national competitive advantage?

Which of the following is a theory that can be used to justify limited government intervention to support the development of certain export-oriented industries?

Which of the following is the main principle of mercantilism?

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

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