Exam 3: Sources of Comparative Advantage

The theory of overlapping demands applies best to trade in manufactured goods.

When transportation costs are included in a trade model

Industrial policy includes using governmental subsidies as a tool to provide domestic firms an edge over foreign competitors in domestic and foreign markets.

Although the theory of comparative advantage explains trade in manufactured goods, it has no explanatory value for trade in business services.

Which products would LEAST apply to the product life cycle theory?

In the United States, skilled labor is relatively abundant and unskilled labor is relatively scarce.Exporting goods that require skilled labor will

What is the focus of the product life cycle theory, and where is it applicable?

The imposition of government regulations (clean environment, workplace safety, product safety) on domestic steel companies tends to result in lower production costs and improved competitiveness.

According to the product-life-cycle theory, the first stage of a product's trade cycle is when it is introduced to the home market.

The theory of overlapping demands asserts that trade in manufactured goods is stronger the less similar the demand structures of two countries.

Boeing Inc.has criticized The Airbus Company's competitiveness on the grounds that Airbus benefits from

According to the factor-endowment theory, a country will import that good which intensively uses the country's relatively abundant resource.

The Leontief paradox questioned the validity of the theory of

Which theory suggests that factor (resource) endowments determine a nation's comparative advantage?

With economies of scale, specialization in a few products allows a manufacturer to benefit from longer production runs, which lead to decreasing average cost.

Assume that the United States is relatively scarce in unskilled labor and relatively abundant in capital.According to the Stolper- Samuelson theorem, free trade policies would tend to be opposed by ______ in the United States.

For the United States, empirical studies indicate that over the past two decades the cost of international transportation relative to the value of U.S.imports has

Industrial processes that add weight or bulk to a commodity are likely to be located near the resource market to minimize transportation costs.

Most theories dealing with the principle of comparative advantage explain the pattern of international trade by differences in

Intra-industry trade in differentiated products can be explained by