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WorksheetsChapter 3: International Trade & Investment Theory
Total questions: 20
Worksheet time: 10mins
The theory of ________ maintains that a country's wealth is measured by its holdings of gold and silver.
mercantilism
neomercantilism
competitive advantage
comparative advantage
According to mercantilism, what should a country's primary goal be?
protecting citizens from unfair labor practices
encouraging imports to prevent resource depletion
promoting exports to enlarge gold and silver holdings
ensuring sufficient labor for low-wage jobs in the textile industry
Mercantilism ________.
suggests that a country should export those goods for which it is more productive than other countries and trade for those goods for which other countries are more productive
maintains that a country's wealth is measured by its holdings of gold and silver
suggests that a country will have a comparative advantage in producing products that intensively use resources it has in abundance
argues that most trade in manufactured goods should be between countries with similar per capita incomes
Which theory suggests that a country should export those goods and services for which it is more productive than other countries and import those goods and services for which other countries are more productive?
mercantilism
comparative advantage
absolute advantage
specialization of countries
The primary flaw in the theory of absolute advantage is that the theory ________.
confuses the acquisition of treasure with the acquisition of wealth
looks only at relative productivity differences rather than competitive differences
suggests that no trade will occur when one country has an absolute advantage in multiple products
incorporates the concept of opportunity cost in determining which goods a country should produce
Which theory suggests that a country should produce and export those goods and services for which it is relatively more productive than other countries and import those goods and services for which other countries are relatively more productive?
relative advantage
comparative advantage
absolute advantage
specialization of countries
The ________ of a good is the value of what is given up to get the good.
relative cost
opportunity cost
absolute cost
discount cost
Which theory listed below is also called the Heckscher-Ohlin theory?
relative advantage
comparative advantage
relative factor endowments
specialization of countries
Japan exports Toshiba Computers to the United States, and the United States exports Apple Computers to Japan. This is an example of ________.
mercantilism
diversification
interindustry trade
intraindustry trade
Saudi Arabia has large crude oil reserves, and Bangladesh has a large pool of skilled workers. These are both examples of ________.
factor endowments
economies of scope
production factors
opportunity costs
The country similarity theory suggests that most trade in manufactured goods should be between countries with similar ________.
labor costs
economic development
natural resources
cultures and languages
In which stage of the international product life cycle does the innovating firm's country become a net importer of the product?
new product stage
maturing product stage
standardized product stage
Declining product stage
Which of the following is one of the four elements discussed in the theory of national competitive advantage?
factor conditions
opportunity costs
equity conditions
market saturation rates
________ suggest that FDI will be more likely to occur when transaction costs with a second firm are high.
Eclectic theory
Internalization theory
Ownership advantage theory
National competitive advantage
Which of the following is one of the conditions specified in eclectic theory for the occurrence of foreign direct investment?
non-ownership advantage
location advantage
home country advantage
externalization advantage
According to internalization theory, firms are more likely to license their brand names when transaction costs are high.
True
False
Dunning suggests that FDI will occur when there is an ownership advantage, a location advantage, and an internalization advantage.
True
False
Which of the following is a condition of Dunning's eclectic theory?
The firm must own a competitive advantage that overcomes competing against foreign firms in their markets.
Research and development costs must outweigh expenses related to foreign direct investment.
The firm must benefit more from outsourcing a service than controlling a foreign business.
Business activity must be more profitable in a domestic location than in a foreign location.
For the ________ advantage to accrue, undertaking the business activity must be more profitable overseas than undertaking it locally.
ownership
location
home country
internalization
Examples of ownership advantage include which of the following?
prestige
liability
intellectual property
benefits of outsourcing
