International Trade and Economic Policies

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According to the text, what is the main benefit of cross-border trade?

Countries can specialize in the production of goods and services they are most efficient at (correct)

Countries can reduce their dependence on other nations

Countries can increase their domestic production

Countries can import goods and services that they cannot produce efficiently

According to the text, what is the difference between free trade and managed trade?

Free trade allows products to be sold without paying import duties, while managed trade only allows products manufactured in Canada, USA, or Mexico (correct)

Free trade allows products to be sold across North America without paying import duties, while managed trade imposes restrictions on what citizens can buy from another country

Free trade allows products to be sold across North America without paying import duties, while managed trade imposes quotas and duties

Free trade allows products to be sold without paying import duties, while managed trade restricts the ability to sell products to another country

Which trade theory focuses on differences in labor productivity?

Heckscher - Ohlin theory

Vermon’s product life-cycle theory

Adam Smith’s theory of absolute advantage

David Ricardo’s theory of comparative advantage (correct)

According to the text, what is the main reason for limits on imports?

To promote domestic production Signup and view all the answers

Which trade theory focuses on factors of production?

Heckscher - Ohlin theory Signup and view all the answers

According to the text, what does Adam Smith's theory of absolute advantage explain?

Why countries specialize in the production of goods and services Signup and view all the answers

According to the text, what does Vermon’s product life-cycle theory focus on?

Changes in production location Signup and view all the answers

According to the text, what is the main reason why international trade is beneficial?

Allows specialization Signup and view all the answers

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

Changes in international trade patterns Signup and view all the answers

According to the text, what is the main interest of limits on imports?

To promote domestic production Signup and view all the answers

According to the text, which trade theory advocates government involvement in promoting exports and limiting imports?

Mercantilism Signup and view all the answers

According to the text, which trade theory promotes the idea that a country should specialize in the production of goods for which it has an absolute advantage?

Absolute advantage Signup and view all the answers

According to the text, which trade theory suggests that a country should specialize in the production of goods it produces most efficiently and buy the goods it produces less efficiently from other countries?

Comparative advantage Signup and view all the answers

According to the text, which trade theory suggests that trade is a positive-sum game in which all countries that participate realize economic gains?

Comparative advantage Signup and view all the answers

According to the text, which trade theory assumes a simple world with two countries and two goods, no transportation costs, and constant returns to scale?

Ricardian Model Signup and view all the answers

According to the text, which trade theory suggests that countries will export goods that make intensive use of factors that are locally abundant and import goods that make intensive use of factors that are locally scarce?

Heckscher-Ohlin theory Signup and view all the answers

According to the text, which trade theory raises questions about the validity of the Heckscher-Ohlin theory due to the finding that U.S exports were less capital intensive than U.S. imports?

Leontief Paradox Signup and view all the answers

According to the text, which trade theory suggests that most new products are developed and first sold in the U.S.?

Product life-cycle theory Signup and view all the answers

According to the text, which trade theory suggests that free trade can result in two types of dynamic gains: increasing a country’s stock of resources and increasing the efficiency with which a country uses its resources?

Dynamic gains Signup and view all the answers

According to the text, which trade theory suggests that countries that adopt a more open stance toward international trade enjoy higher growth rates than those that close their economies to trade?

Trade and growth Signup and view all the answers

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

Price Signup and view all the answers

What is the concept that refers to cost reductions associated with large-scale production?

Economies of scale Signup and view all the answers

What does the new trade theory suggest about trade and the variety of goods available to consumers?

Trade can increase the variety of goods available to consumers Signup and view all the answers

What is the term used to describe the economic and strategic advantages accruing to the first to enter a market?

First-mover advantages Signup and view all the answers

According to Porter's diamond, what are the four broad attributes of a nation that shape the environment in which local firms compete?

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

What is the term used to describe the investments in advanced factors of production by related and supporting industries to help an industry achieve a strong competitive position internationally?

Related and supporting industries Signup and view all the answers

According to Porter's theory, what are the two additional variables that can influence the national diamond?

Chance and government Signup and view all the answers

What can shape domestic demand and influence firm rivalry according to Porter's theory?

Government policy Signup and view all the answers

What does Porter suggest that governments should invest in to promote international success in a particular industry?

Education, infrastructure, and basic research Signup and view all the answers

From a profit perspective, where should firms disperse production according to the text?

To countries where production can be performed most efficiently Signup and view all the answers