International Trade Theory Quiz

Which theory suggested that comparative advantage arises from differences in national factor endowments?

• Comparative Advantage

• Heckscher-Ohlin

• Absolute Advantage

• Mercantilism

Porter’s diamond of competitive advantage includes all of the following except

• Firm strategy, structure, and rivalry

• Demand conditions

• Factor endowments

• First-mover advantages

_________ refer to the nature of home demand for the industry’s product or service.

• Demand conditions

• Related and supporting industries

• Factor endowments

• Firm strategy, structure, and rivalry

What is the theory that suggests a country should maintain a trade surplus and views trade as a zero-sum game?

• Heckscher-Ohlin

• Comparative Advantage

• Absolute Advantage

• Mercantilism

According to Adam Smith's theory of absolute advantage, a country should specialize in producing goods for which it has:

• Least resources

• A comparative advantage

• No resources

• An absolute advantage

Which theory predicts that countries will export goods that make intensive use of locally abundant factors and import goods that make intensive use of locally scarce factors?

• Heckscher-Ohlin

• Comparative Advantage

• Absolute Advantage

• Mercantilism

The product life-cycle theory suggests that as products mature, the location of sales and optimal production location will change, affecting the flow and direction of trade. True or False?

• True

• False

• Cannot say

• Partially true

What does Porter's Diamond Theory identify as one of the attributes that promote or impede the creation of competitive advantage?

• Low factor endowments

• Lack of demand

• structure of the firm

• Absence of rivalry

Which theory explains why a nation achieves international success in a particular industry based on factors like factor endowments, demand conditions, and firm strategy?

• Mercantilism

• Absolute Advantage

• Comparative Advantage

• Porter's Diamond Theory

According to the product life-cycle theory, what changes as products mature, affecting the flow and direction of trade?

• Location of sales

• Optimal production location

• Both A and B

• None of the above