International Trade Theories Quiz
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What defines mercantilism's perspective on international trade?

  • It views trade as a zero-sum game. (correct)
  • It encourages mutual benefits from trade.
  • It focuses on comparative advantages.
  • It promotes free trade among nations.

    • Which theory asserts that countries should specialize in goods they can produce most efficiently?

  • Absolute Advantage (correct)
  • Comparative Advantage
  • Product Life Cycle Theory
  • Mercantilism

    • What key concept does comparative advantage emphasize?

  • Maximum production efficiency
  • Absolute measures of cost
  • Relative opportunity costs (correct)
  • Accumulation of wealth in gold

    • Which stage of the product life cycle typically sees the introduction of a new product?

    <p>Introduction</p> Signup and view all the answers

    In the maturity stage of the product life cycle, what primarily happens to competition and prices?

    <p>Competition increases and prices begin to decline.</p> Signup and view all the answers

    What is the main goal of protectionist policies advocated by mercantilists?

    <p>To maximize a nation's treasure reserves.</p> Signup and view all the answers

    What is a key limitation of the absolute advantage theory?

    <p>It does not consider opportunity costs.</p> Signup and view all the answers

    In which stage does a product typically reach broader international demand?

    <p>Maturity</p> Signup and view all the answers

    What is a significant advantage of first movers like Nike?

    <p>Ability to capture significant market share</p> Signup and view all the answers

    Which of the following is a disadvantage for first movers?

    <p>They often incur higher development costs</p> Signup and view all the answers

    One advantage of late movers is their ability to:

    <p>Avoid the mistakes of first movers</p> Signup and view all the answers

    What is a common challenge faced by first movers in a new market?

    <p>High risk and uncertainty</p> Signup and view all the answers

    Which of the following describes a first mover's ability to influence consumer preferences?

    <p>They create trends that competitors must follow</p> Signup and view all the answers

    What is a major characteristic of late movers in the market?

    <p>They often compete with established brands.</p> Signup and view all the answers

    An example of a first mover is Nike with their:

    <p>Air Jordans in the 1980s</p> Signup and view all the answers

    Which of these best describes a disadvantage of late moving in a market?

    <p>They may lack brand reputation.</p> Signup and view all the answers

    What is a key feature of the civil law legal system?

    <p>Codification of laws</p> Signup and view all the answers

    Which of the following countries is NOT an example of a civil law system?

    <p>United States</p> Signup and view all the answers

    How does democracy enhance the business environment?

    <p>By promoting a stable and predictable environment</p> Signup and view all the answers

    What is a challenge faced by businesses in totalitarian regimes?

    <p>Arbitrary and unpredictable governance</p> Signup and view all the answers

    What is a key characteristic of common law systems?

    <p>Judicial precedents influencing future cases</p> Signup and view all the answers

    Which of the following legal systems has the least emphasis on codified laws?

    <p>Common Law</p> Signup and view all the answers

    What can be a direct consequence of individual rights suppression in totalitarian regimes?

    <p>Increased political risk</p> Signup and view all the answers

    Which legal system is associated with the oldest legal traditions?

    <p>Civil Law</p> Signup and view all the answers

    What is a characteristic of a fixed exchange rate system?

    <p>The central bank sets a specific value for its currency relative to another currency.</p> Signup and view all the answers

    What is one disadvantage of maintaining a fixed exchange rate?

    <p>Loss of monetary policy independence.</p> Signup and view all the answers

    What can occur if investors perceive a fixed exchange rate is unsustainable?

    <p>Speculative attacks on the currency may happen.</p> Signup and view all the answers

    Under a fixed exchange rate system, how does a central bank maintain the pegged value of its currency?

    <p>Through active intervention in the foreign exchange market.</p> Signup and view all the answers

    What was an example of a fixed exchange rate system in the 20th century?

    <p>The Bretton Woods System pegged to the US dollar.</p> Signup and view all the answers

    Which advantage does a fixed exchange rate offer to businesses engaged in international trade?

    <p>Stability and predictability of exchange rates.</p> Signup and view all the answers

    What kind of economic challenges does a country face by prioritizing fixed exchange rate stability?

    <p>Limited ability to address domestic monetary issues.</p> Signup and view all the answers

    What is a potential vulnerability of a fixed exchange rate system?

    <p>Risk of currency crisis induced by speculative attacks.</p> Signup and view all the answers

    What is a disadvantage faced by late movers in the athletic shoe market?

    <p>Difficulties in gaining market share against established brands</p> Signup and view all the answers

    What advantage do late movers have over first movers?

    <p>They can adapt their products to meet new market demands.</p> Signup and view all the answers

    Which mode of entry typically involves a larger commitment of resources?

    <p>Equity modes</p> Signup and view all the answers

    What is a wholly owned subsidiary?

    <p>A company that is completely owned and controlled by a parent organization</p> Signup and view all the answers

    What is a key barrier late movers must overcome when entering the athletic shoe market?

    <p>Existing economies of scale held by first movers</p> Signup and view all the answers

    How can competitors benefit from the first mover investments made by Nike?

    <p>By leveraging Nike's market development and consumer awareness</p> Signup and view all the answers

    In what way do non-equity modes differ from equity modes in foreign market entry?

    <p>They require less resource commitment and may include licensing agreements.</p> Signup and view all the answers

    What is a potential benefit of being a first mover in a market?

    <p>Reduced competition from late entrants</p> Signup and view all the answers

    What does the resource-based view primarily focus on?

    <p>Firm's internal resources and capabilities</p> Signup and view all the answers

    Which of the following describes a 'valuable' resource?

    <p>A resource that enables the firm to exploit opportunities or mitigate threats</p> Signup and view all the answers

    Why are 'rare' resources important for competitive advantage?

    <p>They provide a temporary source of differentiation</p> Signup and view all the answers

    What challenges does the 'liability of foreignness' highlight?

    <p>The advantages of local firms over foreign firms</p> Signup and view all the answers

    Which type of resource is characterized by being difficult to replicate?

    <p>Inimitable resources</p> Signup and view all the answers

    How do organizationally embedded resources contribute to a firm's success?

    <p>They are effectively integrated within the firm's structures and culture</p> Signup and view all the answers

    What must firms do to overcome the liability of foreignness?

    <p>Build strong local relationships and adapt offerings</p> Signup and view all the answers

    What is a key feature of a firm's resources that provides sustained competitive advantage?

    <p>Resources that are valuable, rare, inimitable, and embedded</p> Signup and view all the answers

    Study Notes

    C211 Study Guide Questions

    • Questions are designed to help with the C211 Global Economics for Managers assessment.
    • Questions cover important concepts in each competency.
    • Students can use the questions to take notes while studying or to reinforce understanding.

    Competency 1: Business Decision-Making in the Global Environment

    • Globalization (Peng Chapters 1, 5, 6, 11):

      • Institution-Based View: Emphasizes the role of formal and informal institutions in shaping business success in the global arena.
        • Formal institutions: Explicit regulations (laws, regulations, and rules), including property rights, contract enforcement, and trade policies.
        • Informal institutions: Less codified but powerful (cultural norms, ethical values, and societal expectations).
      • Resource-Based View: Focuses on internal resources and capabilities as a driver of competitive advantage in global markets.
        • Valuable resources: Enable exploitation of opportunities and mitigation of threats.
        • Rare resources: Not widely available to competitors, yielding differentiation.
        • Inimitable resources: Difficult to replicate due to unique historical conditions, complex social networks, or causal ambiguity.
        • Organizationally embedded resources: Effectively integrated within firm structures, systems, and culture.

    • FDI (Foreign Direct Investment):

      • Definition: A firm investing in, controlling, and managing value-added activities in other countries.
      • Types of FDI:
        • Horizontal FDI: Firm duplicates home country activities at a similar value chain stage in a host country.
        • Vertical FDI: Firm expands operation to upstream or downstream value chain stages.

    • OLI advantage:

      • Ownership advantages stemming from firm-specific resources and capabilities.
      • Location advantages related to host country or region attractiveness (market access, resources, favorable regulations).
      • Internalization advantages where conducting transactions internally is more efficient than external markets (high transaction costs, protecting proprietary knowledge).

    • Political views on FDI:

      • Radical view: Hostile to FDI, viewing it as a tool of exploitation.
      • Free market view: Strongly supports FDI to utilize comparative advantages.
      • Pragmatic nationalism: Balances the pros and cons of FDI, approving it only when benefits outweigh costs.

    • Globalization:

      • Views:
        • A new force sweeping the world
        • A long-run historical evolution
        • A pendulum swinging between extremes

    Competency 2: Political and Economic Forces (Peng Chapter 2)

    • Institutions and Uncertainty Reduction:

      • Institutions (formal and informal rules) reduce uncertainty.
      • Formal Institutions: Laws, regulations, and rules.
      • Informal Institutions: Culture, ethics, norms, which can often be more critical than formal institutions.

    • Totalitarianism vs Democracy:

      • Totalitarianism: Centralized power in the hands of a single person or party.
      • Democracy: Power vests in citizens, who elect representatives.

    Competency 3: Economic Decision-Making by Firms and Customers (Mankiw Chapter 21)

    • Budget Constraint:

      • Represents the limited income and prices of goods and services.
      • Can be graphically shown as a downward-sloping line.
      • Shifts in response to income changes and prices of goods.

    • Indifference Curves:

      • Show the combinations of goods that provide the same level of satisfaction to a consumer.
      • Downward sloping, reflecting trade-offs.

    • Properties of Indifference Curves:

      • Higher indifference curves are preferred.
      • Indifference curves cannot cross.
      • Downward sloping curves are convex

    Competency 4: Microeconomics and Macroeconomic Principles

    • Federal Funds Rate: Interest rate at which banks lend to one another.
    • Open Market Operations: Fed buys or sells U.S. government bonds.
    • Aggregate Demand: Total demand for goods and services.
    • Fiscal Policy: Government spending and taxes, used to influence aggregate demand.
    • Monetary Policy: Interest rate manipulation; used to influence aggregate demand.
    • Crowding out effect: Increased government spending can lead to higher interest rates, reducing private investment.

    Competency 5: Assessing Global Economic Performance and International Trade

    • Consumer Surplus: Difference between willingness to pay for a good/service and the actual price paid.

    • Producer Surplus: Difference between the price received for a good/service and the minimum price accepted to produce it.

    • Total Surplus: Sum of consumer and producer surplus, representing overall economic welfare.

    • GDP: Market value of all final goods and services produced within a country's borders over a period (normally a year).

    • Components of GDP:

      • Consumption (C)
      • Investment (I)
      • Government Purchases (G)
      • Net Exports (NX)

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    C211 Study Guide Questions V3 PDF

    Description

    Test your knowledge on key concepts in international trade, including mercantilism and the theory of comparative advantage. Explore product life cycle stages and the dynamics between first and late movers in the market. This quiz will challenge your understanding of trade theories and their real-world applications.

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