International Trade and Economic Policies

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According to the text, what is the main competitive weapon when the product becomes standardized?

Marketing

Quality

Price (correct)

Innovation

What is one of the implications of economies of scale in international trade?

Increase in average cost

Decrease in consumer demand

Increase in cost reductions (correct)

Decrease in product variety

What happens to the variety of goods and costs in a world without trade?

Variety of goods increases, costs decrease

Variety of goods increases, costs increase

Variety of goods decreases, costs decrease

Variety of goods decreases, costs increase (correct)

What are first-mover advantages in the context of international trade?

Scale-based cost advantage for first entrants Signup and view all the answers

According to Porter, what are the four broad attributes of a nation that shape the environment for local firms?

Factor endowments, demand conditions, supporting industries, firm rivalry Signup and view all the answers

What are the basic factors of factor endowments?

Natural resources, climate, location, demographic Signup and view all the answers

What is the relationship between vigorous domestic rivalry and competitive advantage in an industry?

Positive relationship Signup and view all the answers

According to Porter, what can influence the national diamond apart from the four broad attributes?

Chance and government Signup and view all the answers

What can shape domestic demand and firm rivalry according to the text?

Subsidies and regulations Signup and view all the answers

What is one managerial implication discussed in the text?

Firms should disperse production to countries with higher efficiency Signup and view all the answers

Which trade theory advocates government intervention to achieve a trade surplus?

Mercantilism Signup and view all the answers

Which trade theory promotes the idea that countries should specialize in the production of goods for which they have an absolute advantage?

Absolute advantage Signup and view all the answers

Which trade theory suggests that countries should specialize in the production of goods they produce most efficiently and buy the goods they produce less efficiently from other countries?

Comparative advantage Signup and view all the answers

Which trade theory argues that unrestricted free trade leads to greater potential world production compared to restricted trade?

The theory of comparative advantage Signup and view all the answers

Which trade theory assumes a simple world with two countries and two goods, no transportation costs, and no difference in the price of resources?

The theory of comparative advantage Signup and view all the answers

Which trade theory suggests that countries that adopt a more open stance toward international trade enjoy higher growth rates?

Sachs and Warner's measure of openness to trade Signup and view all the answers

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

Smith, Ricardo, and Heckscher-Ohlin Signup and view all the answers

Which trade theory found that U.S. exports were less capital intensive than U.S. imports, raising questions about the validity of the Heckscher-Ohlin theory?

The Leontief Paradox Signup and view all the answers

Which trade theory suggests that free trade can result in dynamic gains, such as an increase in a country's stock of resources and the efficiency with which resources are utilized?

Dynamic effects and economic growth Signup and view all the answers

Which trade theory raises concerns about the impact of a free trade agreement between a rich country (U.S) and a poor country (China) that rapidly improves its productivity?

The Samuelson critique Signup and view all the answers

According to the text, what is the main benefit of free trade?

Allows specialization Signup and view all the answers

Which trade theory focuses on differences in labor productivity?

David Ricardo’s theory of comparative advantage Signup and view all the answers

According to the text, which trade theory focuses on factors of production?

Heckscher - Ohlin theory Signup and view all the answers

According to the text, which trade theory focuses on production location changes as products become more widely accepted?

Vermon’s product life-cycle theory Signup and view all the answers

According to the text, what is the main reason why limits on imports are often in the interest of domestic producers but not domestic consumers?

Limits on imports are often in the interest of domestic producers but not domestic consumers Signup and view all the answers

According to the text, what do trade theories explain?

Trade theories explain why international trade is beneficial even for products a country can produce itself Signup and view all the answers

According to the text, what is difficult to explain about the observed pattern of international trade?

Much of the observed pattern of international trade is difficult to explain Signup and view all the answers

According to the text, what is the main implication of Adam Smith’s theory of absolute advantage?