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International Trade Theory Quiz

Total questions: 10

Worksheet time: 5mins

Name
Class
Date
1.

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

a)

Comparative Advantage

b)

Heckscher-Ohlin

c)

Absolute Advantage

d)

Mercantilism

2.

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

a)

Firm strategy, structure, and rivalry

b)

Demand conditions

c)

Factor endowments

d)

First-mover advantages

3.

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

a)

Demand conditions

b)

Related and supporting industries

c)

Factor endowments

d)

Firm strategy, structure, and rivalry

4.

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

a)

Heckscher-Ohlin

b)

Comparative Advantage

c)

Absolute Advantage

d)

Mercantilism

5.

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

a)

Least resources

b)

A comparative advantage

c)

No resources

d)

An absolute advantage

6.

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?

a)

Heckscher-Ohlin

b)

Comparative Advantage

c)

Absolute Advantage

d)

Mercantilism

7.

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?

a)

True

b)

False

c)

Cannot say

d)

Partially true

8.

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

a)

Low factor endowments

b)

Lack of demand

c)

structure of the firm

d)

Absence of rivalry

9.

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

a)

Mercantilism

b)

Absolute Advantage

c)

Comparative Advantage

d)

Porter's Diamond Theory

10.

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

a)

Location of sales

b)

Optimal production location

c)

Both A and B

d)

None of the above