International business environment

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

• comparative advantage

• mercantilism

• strategic trade

• national competitive advantage of industries

Which of the following trade theories divides the nations of the world into three categories?

• National competitive advantage of industries

• Strategic trade

• Factor endowment

• Product life cycle

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 of the following ideas is closely linked to the theory of absolute advantage?

• All international trade must be closely regulated by governments.

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

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

• Nations should specialize in economic activities in which they have comparative advantage.

Assume that there are two countries, A and B, and that they can both produce two goods, X and Y. The theory of comparative advantage predicts that:

• Trade can only take place if country A has an absolute advantage in producing one of the goods, and country B has an absolute advantage in producing the other.

• Trade can take place even if country A has an absolute advantage in both providing that B chooses to specialize in the good in which it has the least comparative disadvantage, and A specializes in the one in which it has the greater comparative advantage

• Trade between A and B will only take place if both countries are at a comparatively similar stage in the development of their economies

• None of the above.

Who has the ABSOLUTE advantage in making bracelets?

• Marie

• Isabella

The US can produce 1 ton of sugar using 4 acres of land, or they can produce 1 ton of avocados using 6 acres.  Ecuador can produce 1 ton of sugar using 5 acres of land or 1 ton of avocados using 4 acres.  Which country should produce avocados? 

• Ecuador

• US

• not enough information

Any activity which slows or outright blocks the free exchange of goods and services between nations.

• Voluntary Trade
• Specialization
• Currency Exchange
• Embargo

Voluntary Export Restraint

• limit is imposed by the importing country.

• limit is self-imposed by the exporting country.

• limit is imposed by trade bloc.

• limit is self-imposed by the importing country.

Which of the following is a potential negative effect of trade protectionism?

• Improved trade relations with other countries

• Increased variety of goods available

• Increased competition for domestic producers

• Higher prices for consumers