International Trade Theory

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Question 1

Free

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Free trade 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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Question 2

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The theories of Smith and Ricardo show that countries should not engage in international trade for products that it is able to produce for itself.

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Question 3

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David Ricardo's theory of comparative advantage explains international trade in terms of international differences in political environments.

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Question 4

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New trade theory stresses that in some cases countries specialize in the production and export of particular products because the world market can support only a limited number of firms.

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Question 5

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

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Question 6

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

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Question 7

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Mercantilism supports the idea that countries should export more than what they import.

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Question 8

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Mercantilist doctrine advocates unrestricted free trade between countries.

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Question 9

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The principle of mercantilism views trade as a positive-sum game.

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Question 10

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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 11

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Adam smith argued that countries should specialize in the production of goods for which they have an absolute advantage.

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Question 12

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According to Ricardo's theory of comparative advantage,countries should produce all the products for which they have an absolute advantage.

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Question 13

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According to Ricardo's theory of comparative advantage,countries shall not produce a good even if they have an absolute advantage in its production.

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Question 14

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The theory of comparative advantage suggests that trade is a positive-sum game in which all countries that participate realize economic gains.

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Question 15

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Simple model of free trade assumed away transportation costs between countries.

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Question 16

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Resources always move easily from one economic activity to another.

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Question 17

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The production possibility frontier will be parabolic if constant return to specialization is observed.

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Question 18

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The production possibility frontier will be convex if constant return to specialization is observed.

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Question 19

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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 20

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The simple comparative advantage model assumed that trade does not change a country's stock of resources or the efficiency with which it utilizes those resources.

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