International Trade Theory

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Question 1
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The theories of Smith and Ricardo show that a country should engage in international trade, even for products that it is able to produce for itself.

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Question 2
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Porter's theory of national competitive advantage recommends unrestricted free trade between countries.

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Question 3
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Heckscher-Ohlin theory supports the case for unrestricted free trade between nations.

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Question 4
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Mercantilist doctrine advocates unrestricted free trade between countries.

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Question 5
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A country has an absolute advantage in the production of a product when it is more efficient than any other country in producing it.

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Question 6
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Factor endowments refer to the extent to which a country is gifted with such resources as land, labor, and capital.

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Question 7
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Heckscher-Ohlin theory stresses that comparative advantage arises from differences in productivity.

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Question 8
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Ricardo's theory makes fewer simplifying assumptions compared to Heckscher-Ohlin theory.

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Question 9
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A key assumption in the Heckscher-Ohlin theory is that technologies are the same across countries.

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Question 10
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Some of the arguments made by the product life-cycle theory seem ethnocentric and increasingly dated when viewed from an Asian or European perspective.

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Question 11
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XYZ Toys manufactures and sells small quantities of each of its products, but it can still benefit from economies of scale.

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Question 12
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The simple model of free trade assumed away transportation costs between countries.

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Question 13
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Resources always move easily from one economic activity to another.

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Question 14
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Diminishing returns show that it is feasible for a country to specialize to the degree suggested by the simple Ricardian model.

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Question 15
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According to Paul Samuelson's critique, a poor country will rapidly improve its productivity if a rich country enters into a free trade agreement with it.

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Question 16
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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.

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Question 17
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New trade theorists stress the role of luck in giving a firm first-mover advantages.

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Question 18
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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.

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Question 19
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From a profit perspective, it makes sense for firms to disperse their productive activities to those countries where they can be performed most efficiently.

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Question 20
Multiple Choice

________ refers to a situation where a government does not attempt to influence through quotas or duties what its citizens can buy from another country.

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A
Fair trade
B
Trade theory
C
Free trade
D
Mercantilism
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