IB exam 2 quizzes

Intel spreads the huge fixed costs of developing new generation chips over the nearly 2 billion chips it sells to computer makers. Intel benefits from

Economies of scale

Porter, in his diamond model, suggested that there is a strong association between ________ and the creation and persistence of competitive advantage in an industry.

vigorous domestic rivalry

U.S. exports are less capital-intensive than U.S. imports, despite the relative abundance of capital in the country. What is this phenomenon that runs contrary to the prediction of the Heckscher-Ohlin theory called?

Leontief's paradox

Which of the following theories states that in those industries where the output required to attain economies of scale represents a significant proportion of total world demand, the global market may be able to support only a small number of enterprises?

new trade

Which of the following suggests that consumers in all nations can consume more if there are no restrictions on trade even when the nations differ or are less efficient?

Ricardo's theory of comparative advantage

Which of the following components of Porter's diamond is particularly important in shaping the attributes of domestically made products and in creating pressures for innovation and quality?

demand conditions

Which of the following is in a country's best interests, according to the main tenet of mercantilism?

maintaining a trade surplus

The new trade theory is at variance with which of the following theories, which suggests that a country will predominate in the export of a product when it is particularly well endowed with those factors used intensively in its manufacture?

Heckscher-Ohlin

According to the product life-cycle theory, the locus of global production initially switches from the United States to other advanced nations and then from those nations to developing countries. Which of the following is most likely to be a consequence of these trends?

Over time, the United States switches from being an exporter of a product to an importer of the product

India is the largest exporter of information technology services to the U.S. In turn, the U.S. exported $3 billion worth of aircraft to India. Which of the following is illustrated by this form of trade between India and the U.S. (according to Adam Smith)?

absolute advantage

Many developing countries have a potential comparative advantage in manufacturing, but new manufacturing industries cannot initially compete with well-established industries in developed countries, according to

infant industry argument

According to Paul Krugman, a country that attempts to use strategic trade policy to establish a domestic firm in a dominant position in a global industry, is most likely to

provoke retaliation

If Argonia exports vast quantities of cheap toys to Cadmia, selling them at below their costs of production, it would constitute

dumping

Tariffs cause damage to _____ because this group must pay more for certain imports.

consumers

At one time, the French government required that all imported videocassette recorders arrive in France through a small customs entry point that was both remote and poorly staffed. This policy, which in effect made it impractical for a foreign company to export videocassette recorders to France, is an example of a(n):

administrative trade policy

_____ take many forms including cash grants, low-interest loans, tax breaks, and government equity participation in domestic firms.

subsidies

Which of the following is a government payment to a domestic producer?

subsidy

Which of the following groups is thought by experts to benefit from the imposition of tariffs?

government and producers

Animax Limited got an order to sell 50,000 central processing units (CPUs) to Palladia, but the Palladian government stipulated that 15 percent of the component parts of those CPUs must be produced in Palladia. This stipulation by the Palladian government would be example of a(n)

local content requirement

Which of the following groups benefits the most from the imposition of tariffs?

domestic producers

Which of the following is defined as a group of countries committed to removing all barriers to the free flow of goods and services between each other, but pursuing independent external trade policies?

free trade area

To spur trade, Cormoran, Brithea, and Asmakush decided on economic integration where there were no barriers to trade between the three countries, they agreed on a common external trade policy, and allowed factors of production to move freely between the three countries. In short, the three countries formed a

common market

Over time the euro will impact the pan-European capital market by leading to

an increased efficiency with which investment funds are allocated

The ________ committed European Community members to adopt a common currency by January 1, 1999.

Maastricht treaty

Which of the following is true of the provisions of the North American Free Trade Agreement?

It seeks the removal of most barriers on the cross-border flow of services

Establishment of the euro required participating national governments to

give up control over monetary policy

Suppose the country of Ceria and Lithinia imposed tariffs on imports from all countries, and then they set up a free trade area, scrapping all trade barriers between themselves but maintaining tariffs on imports from the rest of the world. Now, Ceria begins to import sugar from Lithinia. However, Ceria had previously been importing sugar from another country, Cadnia, which produced sugar more cheaply than Ceria or Lithinia. This is an example of

trade diversion

Which of the following is the reason that Great Britain, Denmark, and Sweden have stayed out of the euro zone?

implied loss of national sovereignty to the European Central Bank

Which of the following is responsible for proposing European Union legislation, implementing it, and monitoring compliance with European Union laws by member-states?

European Commission

Which of the following meets in Strasbourg, France, is primarily a consultative rather than a legislative body, and debates legislation proposed by the commission and forwarded to it by the council?

European Parliament