Exam 12: Industrial Structure and Trade in the Global Economy: Businesses Without Borders

Most foreign direct investment occurs through the actions of small firms with operations that spill over to only one or two other countries.

The relevant market is:

A firm experiences economies of scale along the downward-sloping portion of its long-run average cost curve.

The geographic-based rationale for international trade is that firms seeking to take advantage of external economies and agglomeration naturally exchange products across borders, thereby generating international trade.

The fact that a the minimum efficient scale for a nation-s industry may be less than the scale it can attain without trade could provide a rationale for international trade.

Which of the following is not an example of a barrier to entry?

Agglomeration refers to:

In a monopolistically competitive industry, firms can earn economic profits in the short run that lead to industry exit and zero long-run economic profits.

Which of the following two elements are both central to "gravity" models of international trade?

An industry concentration ratio is the:

Vertical investment involves the establishment of a foreign subsidiary of a multinational firm that produces a good or service that is similar to the one the firm produces in its home country.

Which of the following is not a characteristic of a monopolistically competitive industry?

A set of laws aimed at promoting specific industries within a nation is an example of:

An industry structure in which only a few firms supply the bulk of the industry's output is monopolistic competition.

Factors that prevent entrepreneurs from immediately creating a new firm are called barriers to entry.

Under international law, dumping is permitted if it entails selling in a domestic market at a price below the foreign firm-s average production cost or at a price lower than the price prevailing in the foreign country.

A government licensing requirement is an example of a barrier to entry.

"Gravity" models of international trade emphasize the roles of relative weights of traded merchandise in determining global flows of trade of physical goods.

If trading costs over the physical distance separating the agglomerations decline sufficiently, international trade may take place even though the goods are similar, which can help to explain why intra-industry trade may or may not occur, irrespective of traditional economies of scale that are internal to firms.

Long-run average cost is defined as the ratio of a firm-s output to the total cost of producing that output when all factors are variable.