According to the resource-based view, why do nations trade?

• Because they have similar exports

• Because they want to impose tariffs

• Because some firms in one nation generate valuable, unique, and hard-to-imitate exports

• Because all nations have the same resources

What does the institution-based view suggest about international trade?

• It is based solely on the economic conditions of a country

• It is determined by the comparative advantage of nations

• It is governed by laws and regulations aiming to share gains from trade

• It is a historical concept no longer relevant

What is a trade deficit?

• A condition where a nation exports more than it imports

• A condition where a nation imports more than it exports

• The total value of a nation's exports

• The total value of a nation's imports

Which of the following is NOT a classical theory of international trade?

• Mercantilism

• Absolute advantage

• Comparative advantage

• Product life cycle

Which one is a modern theory of international trade?

• Mercantilism

• Absolute advantage

• Strategic trade

• Comparative advantage

What is absolute advantage according to the key terms provided?

• The relative advantage one nation enjoys over another.

• The economic advantage one nation enjoys that is absolutely superior to other nations.

• A benefit that accrues to firms that enter the market first.

• The extent to which different countries possess various factors of production.

Which of the following is NOT one of the major theories of international trade advanced before the 20th century?

• Mercantilism

• Absolute advantage

• Comparative advantage

• Diamond theory

What does the comparative advantage refer to?

• The economic advantage one nation enjoys that is absolutely superior to other nations.

• The extent to which different countries possess various factors of production.

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

• A benefit that accrues to firms that enter the market first.

What is the Diamond theory?

• A theory that suggests that free market forces should determine how much to trade.

• A theory that suggests that the competitive advantage of certain industries in different nations depends on four aspects that form a "diamond."

• A theory that suggests that nations will develop comparative advantages based on their locally abundant factors.

• The economic advantage one nation enjoys that is absolutely superior to other nations.

What does the Factor endowment theory suggest?

• That the competitive advantage of certain industries depends on four aspects that form a "diamond."

• That nations will develop comparative advantages based on their locally abundant factors.

• That free market forces should determine how much to trade with little or no government intervention.

• That it is a benefit that accrues to firms that enter the market first.