The World of International Trade

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30 Questions

According to Krugman's new trade theory, what is the focus?

First-mover advantages

Which trade theory advocates government involvement in promoting exports and limiting imports?

Mercantilism

Which trade theory calls for unrestricted free trade?

New trade theory

According to the theory of comparative advantage, what should a country specialize in?

Producing goods it produces most efficiently

What does the theory of comparative advantage suggest about trade?

Trade is a positive-sum game

What are the assumptions of the Ricardian Model?

Constant returns to scale

What are the two types of dynamic gains that can result from free trade?

Increase in a country's stock of resources and increase in efficiency

What does the Samuelson critique raise concerns about?

Lower wages in the U.S

What do countries that adopt a more open stance toward international trade enjoy?

Higher growth rates

Which trade theory explains comparative advantage arising from differences in national factor endowments?

Heckscher-Ohlin theory

According to the new trade theory, what is one of the implications of economies of scale for international trade?

Trade can increase the variety of goods available to consumers

According to the text, what is one of the factors that can influence the national diamond?

Chance and government

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, supporting industries, and firm rivalry

What is one of the advantages of being a first-mover in a market, according to the text?

A first-mover can gain a scale-based cost advantage

What is one of the factors that can limit the potential for U.S. exports, according to the text?

Lower costs of production in other countries

What is one of the factors that can increase the variety of goods available to consumers, according to the new trade theory?

Economies of scale

According to Porter, what is one of the factors that can help a nation achieve international success in a particular industry?

Related industries

What is one of the factors that can shape the domestic demand of a country, according to the text?

Government policies

What is one of the factors that can influence firm rivalry in a country, according to the text?

Government policies

What is one of the managerial implications of Porter's theory, according to the text?

Firms should concentrate production in countries with the largest market size

According to the text, what is the main concept behind gains from trade?

Countries specialize in the production of goods and services that they produce most efficiently

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

Managed trade allows selling products manufactured in Canada, USA, or Mexico only

Which theory explains why international trade is beneficial even for products a country can produce itself?

David Ricardo’s theory of comparative advantage

According to the text, what is the main focus of Ricardo’s theory of comparative advantage?

Differences in labor productivity

According to the text, what is the main focus of the Heckscher - Ohlin theory?

Factors of production

According to the text, what is the main focus of Vermon’s product life-cycle theory?

Production location changes as products become more widely accepted

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

Limits on imports protect domestic jobs

According to the text, what does free trade allow in terms of product manufacturing and selling?

Manufacture products in Canada, USA, or Mexico and sell them without import duties

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

Lower prices for domestic consumers

According to the text, why is much of the observed pattern of international trade difficult to explain?

Multiple factors influencing trade patterns

Test your knowledge on international trade with this quiz! Learn about the benefits of cross-border trade and how countries specialize in producing goods and services. Explore the concept of free trade and understand the implications of shifting towards managed trade.

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