Exam 3: Sources of Comparative Advantage

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

The product life cycle theory predicts that patterns of comparative advantage change over time.A country which initially exports a product to other countries eventually becomes a net importer of the product.

Which of the following trade theories predicts that countries with similar preferences and technologies,but dissimilar factor endowments,will have a pronounced basis for trade with each other

The trade model of the Swedish economists Heckscher and Ohlin maintains that:

A change in factor endowments tends to have a similar impact on a production possibility curve as a change in technology.

In explaining international trade,the product life cycle theory focuses on

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

Concerning the influence that transportation costs have on the location of industry,which of the following industries has generally attempted to locate production facilities close to resource supplies?

Figure 3.1China - US Trade Possibilities -According to Ricardian theory,comparative advantage depends on relative differences in labor productivity.

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

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

The magnification effect suggests that the change in the price of a resource is smaller than the change in the price of the good that uses the resource relatively intensively.

Figure 3.1China - US Trade Possibilities -Considering Figure 3.1 which of the following would be true?

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

Eli Heckscher and Bertil Ohlin are associated with the theory of comparative advantage that stresses differences in:

The specific-factors theory analyzes the income distribution effects of trade in the short run when resources are immobile among industries.

The product-life-cycle model contends that when a new product is introduced to the home market,it generally requires low-skilled labor to produce it.

According to the product life cycle model,comparative advantage shifts from cheap-labor countries to high-technology countries after a manufactured good becomes standardized.

Boeing aircraft company was able to cover its production costs of the first "jumbo jet" in the 1970s because Boeing could market it to several foreign airlines in addition to domestic airlines.This illustrates:

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