International Business Ch.6

Which of the following is a major benefit of engaging in free trade?

it gives countries access to products that they can not produce

New trade theorists stress the role of luck, entrepreneurship, and innovation in giving a firm first-mover advantages

true

which of the following terms refers to the unit cost reductions associated with increasing output levels?

economies of scale

Identify the theory that supports the view that, in some cases, countries export for the reason that the world market can support only a limited number of firms.

new trade theory

Which of the following is a theory that can be used to justify limited government intervention to support the development of certain-oriented industries?

new trade theory

Walmart makes bulk purchases from its vendors and hence it is able to get better deals than its competitors. This allows Walmart to offer greater discounts to its customers. In this case, Walmart benefits from

economies of scale

Porter contends that government:

can influence each of the four components of the diamond either positively or negatively

Identify the theory that argues that advanced nations have an incentive to develop new customer products and hence such nations always tend to create a good or service for the first time

product life-cycle

The Heckscher-Ohlin theory predicts that countries will

export those goods that make intensive use of factors that are locally abundant

Company A entered the production of office software before its competitors. Because of this, the company's products are more familiar among and favored by customers. This situation exemplifies the ________.

first-mover advantage

Which of the following balance-of-payment accounts records one time payments in the stock of assets?

capital account

According to Adam Smith, a company should specialize in the production of a good when it has

an absolute advantage in the production of the good

The _______ theory was based on the observation that for the most of the twentieth century a very large proportion of the world's new products had been developed by U.S. firms and sold first in the U.S. market

product life-cycle

Identify the theory that predicts that countries will export those goods that make intensive use of factors that are locally abundant

Hecksher-Ohlin Theory

One of the advantages of being the first mover in a market is

the ability to capture scale economies ahead of late entrants

A key assumption in the Heckscher-Ohlin theory is that technologies are the same across countries

true

The commercial aircraft company can supply only a limited number of firms, largely because the existence of established firms would make it difficult to be competitive. This is a basic tenet of

new trade theory

According to Ricardo's theory of comparative advantage, countries should

specialize in the production of those goods if they have lower opportunity cost

Which of the following is a major disadvantage of the product life-cycle introduced by Vernon?

the theory's arguments seems ethnocentric and increasingly dated

Which of the following theories suggests that first mover advantage is significant in the export of a good?

new trade theory

What will happen, according to Paul Samuelson's critique, if a rich country enters into a free trade agreement with a poor country?

The poor country will rapidly improve its productivity

Some of the arguments made by the product life-cycle theory seem ethnocentric and increasingly dated when viewed from an Asian or European perspective.

true

Porter's Theory of National Competitive Advantage recommends that government should never interfere in free trade policies

false

A countries balance of payment accounts keep track of

payments to and receipts from other countries for a particular time period

The _____ argues that a large proportion of the world's new products had been developed by U.S. firms

product life-cycle

Which of the following observations is consistent with Micheal Porter's theory of national competitive advantage?

factors such as domestic demand and domestic rivalry explain nation's dominance in production

David Ricardo's theory of comparative advantage explains global trade in terms of the

opportunity cost

The theory of comparative advantage provides strong rationale for supporting the idea of

free trade

The theories of Smith and Ricardo shows that trade makes every nation better off

true

Apple's iphone was unique when it first came out, with many features that no other phones had. As such, it enjoyed great success and dominated the cell phone market. This demonstrates the first mover advantage

true

A capital-intensive country exports products that are capital intensive. What theory is this an example of?

Heckscher-Ohlin Theory

Country A can produce product X, but it can also buy it at a cheap rate from Country B. Which of the following courses of action is suitable in this situation according to Adam Smith's theory of absolute advantage?

Country A should import product x from country B and it should not attempt to produce it at home

Diminishing returns to specialization occur when

more units of resources are required to produce each additional unit

Which of the following factors, according to Porter, is most likely to give a country competitive advantage over another country?

skilled labor and know-how

XYZ toys manufactures and sells small quantities of each of its products, but it can still benefit from its economies of scale

true

A country has an absolute advantage in the production of a product when it

is more productive and cost efficient than any other country in producing it

Which of the following is an example of a basic factor that a nation will possess as proposed by Porter?

natural resources

According to the new trade theory, firms that establish a first mover advantage with regard to the production of a particular new product ,may subsequently dominate global trade in that product

true

Factor endowments refer to a country's factors of production such as land, labor, and capital

true

_____ argued that countries should specialize in the production of goods for which they have the absolute advantage

Adam Smith

Which of the following is a flaw associated with mercantilism?

Mercantilists view trade as a zero-sum game

The principle of mercantilism views trade as a(n) ______ game

zero-sum

_____ are unit cost reductions associated with a large scale of output

economies of scale

A country has an absolute advantage in the production of a product when it is more productive and cost efficient than any other country producing it

true

Porter argues that a nation's firms gain competitive advantage if their domestic consumers are:

sophisticated and demanding

Which of the following statements is true of the Leontief paradox?

it raised questions about the validity of the Heckscher-Ohlin theory