Deck 5: Trading Internationally

Question 1

Karla Corp.exports large quantities of goods outside the United States and does not import much.Karla Corp.thus directly contributes to the U.S.trade surplus.

Answer 1

True

Question 2

Which of the following statements is true of trade?

A) It only consists of the exchange of services.
B) It involves export and import of goods and services.
C) It leads to the stagnation of the wealth of the world.
D) It only consists of the buying and selling of tangible goods.

Answer 2

B

Question 3

When discussing the question "Why do nations trade?" we are really asking "Why do governmentsfrom different nations trade?"

Answer 3

False

Question 4

Nations go through the trouble of trading internationally as there must be economic gains from trade.

Question 5

According to the resource-based view,there are economic gains from international trade because some firms in one nation generate exports that are valuable,unique,and hard to imitate that firms from other nations find it beneficial to import.

Question 6

Resource mobility is not perfect in reality,and there are many resources that cannot easily be moved from one industry to another.

Question 7

A nation that is more efficient than anyone else in the production of any good or service is said to have a comparative advantage in the production of that good or service.

Question 8

Tariff barriers include subsidies,import quotas,export restraints,local content requirements,administrative policies,and antidumping duties.

Question 9

The strategic trade theory is criticized because many scholars and policy makers are uncomfortable with government intervention.

Question 10

The value of imported items to Australia equals $1 trillion,but the value of exported items from Australia equals $750 billion.Australia has a $250 billion _____.

A) trade deficit
B) trade surplus
C) absolute advantage
D) comparative disadvantage

Question 11

Trade embargoes are politically motivated trade sanctions against foreign countries to signal displeasure.

Question 12

Roc&All Inc.imports large quantities of goods into the United States and does not export much.Roc&All thus directly contributes to the U.S.trade surplus.

Question 13

Which of the following is a difference between merchandise trade and service trade?

A) Merchandise trade takes place only between a firm and a consumer,whereas service trade takes place only between a producer and a consumer.
B) Merchandise trade includes services and foreign direct investment,whereas service trade includes only trade in goods.
C) Merchandise trade is the buying and selling of tangible products,whereas service trade is the buying and selling of intangible services.
D) Merchandise trade is defined by the Four Modes of Supply of the General Agreement on Trade in Services (GATS),whereas service trade is defined by the Four Modes of Demand of the GATS.

Question 14

Calls for protection are only limited to commodity producers.

Question 15

Monitoring and nurturing the absolute advantage of certain locations can determine the success and failure of a firm's exports around the globe.

Question 16

The value of exported items to the United Kingdom equals $1 trillion last year,but the value of items imported by the United Kingdom equals $750 billion.The United Kingdom has a $250 billion _____.

A) trade deficit
B) trade surplus
C) trade volume
D) trade debit

Question 17

The Wealth of Nationsby Adam Smith,published in 1776,is usually considered the foundation of modern economics.

Question 18

In order for free trade to continue,it requires constant efforts to demonstrate and advance the gains from such trade.

Question 19

An exporting country will never voluntarily agree to restrict its exports.

Question 20

Which of the following statements is true of trade surplus?

A) It occurs when a nation only imports goods and services.
B) It occurs when a nation imports goods and services more than it exports.
C) It occurs when a nation only exports goods and services.
D) It occurs when a nation exports goods and services more than it imports.

Question 21

In the context of the product life cycle theory,which of the following statements is true of the maturing stage?

A) In this stage,a new product is commoditized.
B) In this stage,a new product is standardized.
C) In this stage,it becomes worthwhile to produce goods in other developed nations.
D) In this stage,production of a new product that commands a price premium is involved.

Question 22

Net losses that occur in an economy as the result of tariffs are known as:

A) deadweight costs
B) tariff barriers
C) import quotas
D) the material,labor,and distribution gains associated with producing a product

Question 23

Plentiful labor supply in China and innovative commercialization of basic research in the United States are both examples of the_____ theory.

A) diamond
B) strategic trade
C) product life cycle
D) factor endowment

Question 24

Which of the following is true of related and supporting industries within the theory of national competitive advantage of industries?

A) They provide the foundation upon which key industries can excel
B) They highlight a firm's structure,strategy,and rivalry
C) They are able to be developed in a country within a few months to boost a firm's competitive advantage
D) Most firms thrive in the absence of strong related and supporting industries

Question 25

China is able to produce wheat relatively less inefficientlythan it is able to produce aircraft.By letting China specialize in the production of wheat an importing some wheat from China,the United States is able to devote its resources to aircraft.In this example,the United States is:

A) utilizing strategic government intervention
B) gaining first-mover advantage
C) leveraging absolute advantage
D) leveraging comparative advantage

Question 26

_____ is defined as the relative advantage in one economic activity that one nation enjoys in relation to other nations.

A) Outright advantage
B) First-mover advantage
C) Absolute advantage
D) Comparative advantage

Question 27

Strategic trade theory suggests that strategic intervention by governments in certain industries can enhance their odds for international success.These industries:

A) are highly capital-intensive industries.
B) are highly labor-intensive industries.
C) have low barriers to entry.
D) let domestic firms enter the market easily without government assistance.

Question 28

Which of the following statements is true of the theory of national competitive advantage of industries?

A) It focuses on why certain industries within a nation are competitive internationally.
B) It proposes to help only a few strategically important industries.
C) It was first proposed in the 1960s by the American economist Raymond Vernon.
D) It is the idea that governments should actively protect domestic industries from imports and vigorously promote exports.

Question 29

The product life cycle theory is criticized because _____.

A) it assumes that absolute and comparative advantages stem from different factor endowments
B) it assumes that China is absolutely inefficient than the United States in the production of both wheat and aircrafts
C) it argues that by trying to be self-sufficient and producing a wide range of goods,the wealth of a nation is reduced.
D) it assumes that a stage-by-stage migration of production takes at least several years,if not decades

Question 30

The theory of national competitive advantage of industries is also popularly known as the _____.

A) diamond theory
B) product life cycle theory
C) factor endowment theory
D) mercantilism theory

Question 31

In the context of the product life cycle theory,which of the following statements is true of the first stage?

A) In this stage,a new product is commoditized.
B) In this stage,a new product is standardized.
C) In this stage,production of a new product that commands a price premium is involved.
D) In this stage,it becomes worthwhile to produce a product in other developed nations.

Question 32

A(n)_____ is a means of discouraging imports by placing a tax on imported goods.

A) embargo
B) non-tariff barrier
C) tariff barrier
D) import quota

Question 33

According to the theory of absolute advantage,which of the following is true of a nation with free trade?

A) A nation gains by specializing in economic activities in which it has an absolute advantage.
B) A nation gains absolute advantage by restricting trade with other countries.
C) A nation gains tremendously by focusing on economic activities in which it has a comparative advantage.
D) A nation will develop absolute advantage based on its locally abundant factors.

Question 34

The _____ theory is also known as Heckscher-Ohlin theory.

A) strategic trade
B) diamond
C) factor endowment
D) product life cycle

Question 35

The strategic trade theory is criticized because _____.

A) many industries claim that they are strategically important
B) the government does not intervene when necessary
C) the theory claims that the United States will always have a strategic advantage in terms of innovation
D) stage-by-stage migration of production takes several years

Question 36

Which of the following statements is true of the theory of absolute advantage?

A) It was advocated by British economist David Ricardo.
B) It opened the floodgates for the free trade movement.
C) It suggests that international trade is a zero-sum game.
D) It is more realistic and useful than comparative advantage when applied in the real world.

Question 37

According to the resource-based view,which of the following is the reason for economic gains from international trade?

A) Some firms in a nation generate exports that are hard to imitate.
B) Some firms in a nation generate exports that are not valuable or unique.
C) Firms importing products have a balance of trade.
D) Firms exporting more products have a trade surplus.

Question 38

_____ is the assumption that a resource used in producing for one industry can be shifted and put to use in another industry.

A) Resource dependence
B) Resource necessity
C) Resource mobility
D) Resource endowment

Question 39

According to the institution-based view,why do nations benefit from international trade?

A) Because some firms in one nation generate exports that are valuable,unique,and hard to imitate that firms from other nations find it beneficial to import.
B) Because governments actively protect domestic industries from imports and vigorously promote exports.
C) Because different rules governing trade are designed to determine how economic gains from international trade are shared.
D) Because the wealth of the world (measured in gold and silver)is fixed and a nation that exports more than it imports will enjoy the net inflows of gold and silver and become richer.

Question 40

Which of the following statements is true of the theory of mercantilism?

A) It suggested that the wealth of the world was flexible.
B) It proposed the first dynamic theory to account for changes in the patterns of trade over time.
C) It is also referred to as a modern trade theory.
D) It is the oldest theory in international trade.

Question 41

Discuss the propositions of the modern theories of international trade.

Question 42

Discuss the determinants of the success and failure of a firm's exports around the globe.

Question 43

_____ are rules stipulating that a certain proportion of the value of the goods made in one country must originate from that country.

A) Local content requirements
B) Voluntary export restraints
C) Import quotas
D) Subsidies

Question 44

_____ can determine the success and failure of a firm's exports around the globe.

A) Monitoring and nurturing the absolute advantage of certain locations
B) Leveraging comparative advantage of world-class locations
C) Discovering absolute advantage of selective locations
D) Improving the old promising locations

Question 45

_____ against free trade include national security,consumer protection,foreign policy,and environmental and social responsibility.

A) Conservative arguments
B) Protectionist arguments
C) Economic arguments
D) Political arguments

Question 46

Managers who fail to realize when a location no longer has a _____ are likely to fall behind.

A) comparative advantage
B) absolute advantage
C) economic advantage
D) first-mover advantage

Question 47

The oldest and most frequently used economic argument against free trade is the urge to shield domestic industries,firms,and jobs from allegedly unfair foreign competition.This is called _____.

A) protectionism
B) economic nationalism
C) anti-globalization
D) developmentalism

Question 48

_____ are government payments to domestic firms.

A) Import quotas
B) Subsidies
C) Voluntary export restraints
D) Local content requirements

Question 49

Discuss the political arguments against free trade.

Question 50

Which of the following statements is true of import quotas?

A) They are the most straightforward denial of absolute or comparative advantage.
B) They are government payments to domestic firms.
C) They are rules stipulating that a certain proportion of the value of the goods made in one country must originate from that country.
D) They are bureaucratic rules that make it harder to import foreign goods.

Question 51

Which of the following statements is true of nontariff barriers?

A) They are government payments to international firms.
B) They are restrictions on the quantity of goods exported.
C) They can discourage imports by means of subsidies.
D) They tend to encourage imports over exports.

Question 52

Which of the following statements is true of administrative policies?

A) They are imposed on imports that have been dumped.
B) They are bureaucratic rules that make it harder to import foreign goods.
C) They have been developed to show that,on the surface,exporting countries voluntarily agree to restrict their exports.
D) They are rules ordering a certain proportion of the value of the goods made in one country must originate from that country.

Question 53

Compare and contrast absolute advantage and comparative advantage trade theories.

Question 54

Identify the strengths and influences of the classical theories of international trade.

Question 55

A(n)_____ is a government payment to a domestic firm.

A) embargo
B) subsidy
C) tariff barrier
D) business payment