10 Questions
Why do firms engage in international trade?
To engage in win-win deals with other firms
What is the key reason firms in one nation trade with firms in other nations according to the resource-based view?
To import hard-to-imitate exports
What is the main purpose of different rules governing trade according to the institution-based view?
To determine how gains from trade are shared or not shared
What does a trade deficit mean for a nation's economy?
Importing more than exporting
What is the key difference between classical and modern theories of trade?
Time period they originated from
What is the key proposition of the factor endowment theory?
Nations will develop comparative advantage based on their locally abundant factors.
What is the main difference between classical and modern trade theories?
Classical trade theories focus on mercantilism, absolute advantage, and comparative advantage, while modern trade theories include product life cycle, strategic trade, and national competitive advantage.
What is the main idea behind mercantilism?
The wealth of the world is fixed, and a nation that exports more than it imports enjoys a net inflow of money.
What is the main proposition of the theory of absolute advantage?
Countries should specialize in the production of goods in which they have the greatest absolute advantage.
What is the key idea behind the national competitive advantage of industries (or diamond theory)?
The competitive advantage of certain industries in different nations depends on four aspects: country factor endowments, firm strategy, structure and rivalry, domestic demand and related industries.
Explore the reasons behind international trade and why firms engage in it. Learn about the economic gains for both exporters and importers, as well as the resource-based view of trade.
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