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| 1 | |
Adam Smith claimed: |
| | A) | that governments, not market forces, should determine the directions, volume, and composition of international trade. |
| | B) | a nation could trade advantageously if it had a comparative advantage. |
| | C) | that market forces, not government controls, should determine direction, volume, and the composition of international trade. |
| | D) | that customers' tastes are affected by income levels. |
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| 2 | |
Economies of scale and the experience curve effect are important for international trade because: |
| | A) | most manufacturing, mining, and transportation industries are subject to economies of scale. |
| | B) | they explain how a nation's industries can become low-cost producers if the nation has an abundance of a certain class of production factors. |
| | C) | they justify efforts at being a first-mover in order to become an international leader. |
| | D) | they do not allow the spread of very high fixed costs over sales within foreign and home markets. |
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| 3 | |
To sum up international trade theory, we can say that the primary reason for trade is: |
| | A) | the increase in OPEC oil prices. |
| | B) | governments want to accumulate money. |
| | C) | the existence of price differentials among nations. |
| | D) | the creation of new nations from former colonies. |
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| 4 | |
The international product life cycle |
| | A) | has no effect on local firms. |
| | B) | will generally eliminate protection from imports for local firms. |
| | C) | suggests that local companies in developing economies can become more competitive when they partner with foreign producers. |
| | D) | suggests that companies will locate production where the factors of production are more expensive. |
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| 5 | |
Dunning's Eclectic Theory of International Production states that if a firm is going to invest in production facilities abroad, it must have the following kinds of advantages: |
| | A) | ownership-specific, location-specific, and internationalization. |
| | B) | strategic, organizational, and technological. |
| | C) | ownership-specific, location-specific, and internalization. |
| | D) | technological, financial, and human resource. |
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