Multiple Choice
He was the proponent of Absolute Advantage Theory.
a. David Ricardo
b. Adam Smith
a. Adam Smith
It is the concept of exchanging goods and services between two people or entities.
Trade
Implies the trade of goods, services and capital between two countries of the world.
International Trade
International Investment refers to an investment made in a company from a source outside the country.
True
What are the two categories of International Trade Theories.
Classical Country Based Theories
Modern Firm - Based Theories
This theory is based on a country's production resources like land, labor and capital.
a. Absolute Advantage
b. Comparative Advantage
c. Factor Proportion
d. Global Strategic Rivalry
c. Factor Proportion
A complete ban against importing or exporting a product
embargoes / boycotts
It is a pact between two or more nations to reduce barriers to imports and exports among them.
Free Trade
Trade Surplus is a situation where the value of imports is greater than the value of exports.
False. Trade Deficit.
What are the three advantages of firm's expansions internationally.
Market Motives
Economic Motives
Strategic Motives
It focuses on relative productivity differences.
a. Comparative advantage
b. Absolute advantage
c. Competitive Advantage
d. Country Difference
a. Comparative advantage
__________advantage is a theory that is focused on the ability of a country to produce a good more efficiently than another nation.
Absolute
A situation where the value of imports is greater than the value of exports.
Trade Deficit
Dumping is a protectionist tariff that a government places on imports thought to be significantly underpriced.
Anti-dumping
What are the three distinct stages of the Product Life Cycle Theory?
(1) new product
(2) maturing product
(3) standardized product
The granting of mutual concessions in tariff rates, quotas or other commercial restrictions.
a. sovereignty
b. denominator
c. reciprocity
d. trade
c. reciprocity
It is the supreme authority within a territory.
Sovereignty
This theory is often most useful in understanding trade in goods where brand names and product reputations are important factors in the buyers’ decision-making and purchasing processes.
Country Similarity
People trade because they may need or want the goods or services of other nations. It is not because they benefit from the exchange.
False. They also benefit from the exchange.
What are the four determinants linked together by Porter to explain his theory.
(1) local market resources and capabilities
(2) local market demand conditions
(3) local suppliers and complementary industries
(4) local firm characteristics
1. It is a component of globalization which includes: a country's population's life expectancy, knowledge and education measured by the adult literacy, and income.
a. Gross Domestic Product
b. Industrialization
c. Human Development Index
c. Human Development Index
It is an economic policy with an objective of maximizing exports and minimizing imports for an economy.
Mercantilism
It is when people rely on others to provide the goods and services required for supporting their lives or for convenience.
Economic interdependence
Factors that were in great supply relative to demand would be cheaper; factors in great demand relative to supply would be more expensive.
True
Give the proponents of the modern or firm-based trade theories.
Country Similarity Theory – Steffan Linder
Product Life Cycle Theory – Raymond Vernon
Global Strategic Rivalry Theory – Paul Krugman and Kelvin Lancaster
Porter’s National Competitive Advantage Theory – Michael Porter