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?

• A. Economic patriotism

• B. Protectionism

• C. Free trade

• D. Offshoring

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.

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

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

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

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

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.

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?

• A. Comparative advantage theory

• B. Ricardo's theory

• C. New trade theory

• D. Heckscher-Ohlin theory

Which of the following is the main principle of mercantilism?

• 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.

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

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

• A. Mercantilists do not support government intervention in trade.

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

• C. Mercantilists recommend policies to maximize imports.

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