Questions and Answers
Which of the following is NOT one of the three distinct stages of the product life cycle according to Vernon?
What does Porter's National Competitive Advantage theory emphasize as critical for a nation's competitiveness?
Which of the following is a barrier to entry as described in the Global Strategic Rivalry Theory?
What assumption does the Country Similarity Theory make about consumers in similar development stages?
Signup and view all the answers
Which determinant is NOT part of Porter's model of competitive advantage?
Signup and view all the answers
What does Mercantilism promote regarding a country's trade strategy?
Signup and view all the answers
Which theory suggests that a country should focus on producing goods requiring abundant and cheap resources?
Signup and view all the answers
What is the main idea behind Comparative Advantage?
Signup and view all the answers
In the context of international trade, what does the Leontief Paradox demonstrate?
Signup and view all the answers
Which trade theory was postulated by Adam Smith?
Signup and view all the answers
What defines Intraindustry Trade?
Signup and view all the answers
What is the focus of the Heckscher-Ohlin Theory concerning trade?
Signup and view all the answers
What does opportunity cost refer to in international trade theory?
Signup and view all the answers
Study Notes
International Trade Theory
- International Trade involves the exchange of goods and services between entities in different countries through exporting and importing.
- Different theories exist to explain how and why international trade occurs.
Classical or Country-Based Trade Theories
- Mercantilism: Economic policy emphasizing that a nation's wealth is measured by its gold and silver reserves; promotes exports and restricts imports (protectionism).
- Absolute Advantage: Introduced by Adam Smith, asserts that a country efficiently produces goods at a lower cost than others, leading to better specialization.
- Comparative Advantage: Proposed by David Ricardo, focuses on a country’s ability to produce goods at a lower opportunity cost, guiding trade decisions based on efficiency.
- Heckscher-Ohlin Theory: Suggests countries export goods that utilize abundant, cheap factors of production and import goods necessitating scarce resources.
- Leontief Paradox: Identified by Wassily Leontief, reveals that capital-rich countries tend to import capital-intensive goods while exporting labor-intensive goods.
Modern or Firm-Based Trade Theories
- Intraindustry Trade: Examines trade of similar products within the same industry between countries.
- Country Similarity Theory: Proposed by Steffan Linder; suggests countries at similar development stages have analogous consumer preferences.
- Product Life Cycle Theory: Developed by Raymond Vernon; describes three stages of a product's lifecycle: New Product, Maturing Product, and Standardized Products, with production initially localized in the innovating country.
- Global Strategic Rivalry Theory: Introduced in the 1980s by Paul Krugman and Kelvin Lancaster; emphasizes multinational corporations (MNCs) gaining competitive advantages through strategic barriers like R&D, intellectual property, economies of scale, and resource control.
-
Porter's National Competitive Advantage: Developed by Michael Porter, argues a nation's industry competitiveness relies on its ability to innovate and upgrade, based on four key determinants:
- Local Market Resources and Capabilities (Factor Conditions)
- Local Market Demand Conditions
- Local Suppliers
- Local Firm Characteristics
Studying That Suits You
Use AI to generate personalized quizzes and flashcards to suit your learning preferences.
Description
This quiz explores various international trade theories, which provide explanations for the exchange of goods and services across borders. It delves into classical or country-based trade theories, including concepts such as mercantilism and others. Test your understanding of these fundamental concepts in international trade.
