Deck 4: Firm Resources: Competitiveness and Growth

Question 1

Strategic trade policy is argued to be justified in industries characterized by high sunk costs, for example high costs of research and development.

Answer 1

True

Question 2

A country needs absolute rather than comparative advantages to benefit from international trade.

Answer 2

False

Question 3

Anti-dumping duties are levied on importers who are engaging in the following practice deemed unfair in international trade:

A)Failing to source locally
B)Transfer pricing with the intention to minimize tax payments
C)Selling below costs with the intention to push competitors from the market
D)Selling at prices above competitive prices by exploiting monopolistic market positions

Answer 3

C

Question 4

On average, EU countries export 3.5% of their exports to emerging economies.

Question 5

The costs of pursuing one alternative in terms of the forgone revenues of pursuing another alternative are known as

A)Forgone costs
B)Sunk costs
C)Alternative costs
D)Opportunity costs

Question 6

A trade embargo is a politically motivated restriction of imports from a particular country.

Question 7

Mercantilism is a modern trade theory developed in response to observed inequalities of trade during the oil crisis of the 1970s.

Question 8

The infant industry argument suggests that young industries do not need tariff protection because they emerge in all countries at the same time.

Question 9

The economic advantage one nation enjoys due to higher productivity in an economic activity is known as:

A)Free trade
B)Comparative advantage
C)Absolute advantage
D)Trade deficit

Question 10

Trade surplus is an economic condition in which a nation imports more than it exports.

Question 11

The factor endowment theory suggests that:

A)Resources are the foundation of firm's competitive advantages
B)National resource endowments are the foundation for comparative advantages in international trade
C)Many factors contribute to explaining the emergence of comparative advantages
D)Scarce resources are the foundation for comparative trade advantages

Question 12

Which of the following is not considered a 'modern' trade theory?

A)Factor endowment theory
B)Product life cycle theory
C)National competitive advantage ('diamond model')
D)Strategic trade theory

Question 13

In international trade theory, the term 'deadweight loss' is referring to:

A)The loss to exporters due to the introduction of tariffs
B)The loss to importers due to the introduction of tariffs
C)The loss to consumers due to the introduction of tariffs
D)The net loss to society due to the introduction of tariffs