30 Questions
According to opponents of free trade, what are potential consequences of import competition?
Greater income inequality and loss of jobs
What adjustments are made in domestic industries as a country moves toward free trade?
Adjustments in exporters and industries facing import competition
What may be the result of the adjustment process in the face of import competition?
Less-efficient firms may be forced to exit the industry
What is the counter argument to the potential costs of free trade?
Resources are likely to be more effectively (re-)employed in other industries in the long run
What is the potential outcome for displaced workers in the face of import competition?
They may need to be retrained for jobs in expanding industries
What is virtually certain to impose costs on some groups of stakeholders?
The adjustment process
What is the main concern of opponents of free trade?
Greater income inequality
What is the potential long-term benefit of resources being reallocated in other industries?
More effective (re-)employment
What is the potential consequence for less-efficient firms in the face of import competition?
Forced exit from the industry
What adjustments may need to be made in domestic industries that face import competition?
Reallocation of resources (investments)
Which factor can affect the return on investment for global investors?
Government regulations
Why is it important for investors to be aware of potential changes in the government's trade policy?
To maximize firm profitability
What has led to a debate among policy makers regarding the expansion of trade?
Possible costs of international trade
What are some of the benefits of international trade?
Greater economies of scale and product variety
What is one of the gains from exchange in international trade?
Higher prices for exports and greater profit
What is the main focus of this learning module?
The benefits and costs of international trade
What is the purpose of trade restrictions?
To protect domestic industries
What is the motivation for forming trading blocs or trade agreements?
To promote global economic growth
What has been the trend in the global economy over the past few decades?
Rapid growth in trade
What is the impact of trade and trade policy on the overall economy?
Uncertain impact on economic growth
Why does trade lead to a more efficient allocation of resources?
Because it increases production of the export good and reduces production of the import good
Why does trade increase overall welfare?
Because it allows for consumption of a larger bundle of goods
What is the focus of traditional trade models?
Specialization and trade based on comparative advantage
What is the benefit of trade for industries with increasing returns to scale?
Reduced average cost of production
What is intra-industry trade?
Trade between countries with similar products
What type of industry exhibits intra-industry trade?
Monopolistically competitive industry
What are some of the positive influences of trade on GDP?
Higher productivity
Why did Logitech move to Taiwan Region in the late 1980s?
To take advantage of a highly qualified labor force
What are some of the benefits of foreign research and development (R&D) on domestic productivity?
Increased exchange of ideas
What percentage of the benefits of R&D investment in a G-7 country accrues to their trading partners?
25%
Test Your Knowledge: Understanding Global Trade Policies and Their Impact on Investments
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