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| 1 | |
Despite the shortcomings of the Ricardian model, research suggests that the basic proposition that countries will export goods that they are most efficient at producing is borne out by the data. |
| | A) | True |
| | B) | False |
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| 2 | |
The Heckscher-Ohlin Theory focuses on “factor endowments” and their variances among nations to explain comparative advantage more empirically. |
| | A) | True |
| | B) | False |
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| 3 | |
Economies of scale have a number of sources, including the ability to spread fixed costs over a large volume and the ability of large-volume producers to utilize specialized employees and equipment. |
| | A) | True |
| | B) | False |
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| 4 | |
Porter argues that the presence of all four components of his diamond is unnecessary to boost competitive performance as long as one is extremely well developed. |
| | A) | True |
| | B) | False |
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| 5 | |
Underlying most of the theories of international trade is the idea that different countries have specific advantages, and a firm that takes advantage of these can develop a global web of productive activities that maximize the potential in different countries. |
| | A) | True |
| | B) | False |
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| 6 | |
The great strength of the theories of Smith, Ricardo, and Heckscher-Ohlin is that ___________________ . |
| | A) | they identify with precision the specific benefits of international trade |
| | B) | they have been tested by empirical evidence and been correct each time |
| | C) | it is easy to remember the key tenets |
| | D) | there is almost unanimous support for these three theories |
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| 7 | |
While most theories of international trade that support unrestricted free trade exclude governments, new trade theory and ______________________ argue for some limited government intervention to support the development of certain export-oriented industries. |
| | A) | Smith’s theory of absolute advantage |
| | B) | Ricardo’s theory of comparative advantage |
| | C) | Hecksher-Ohlin’s theory of factor endowments |
| | D) | Porter’s theory of national competitive advantage |
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| 8 | |
____________________ suggests a zero-sum game, which represents a major limitation. |
| | A) | New trade theory |
| | B) | Porter’s Diamond |
| | C) | Mercantilism |
| | D) | Leontief’s Paradox |
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| 9 | |
In 1776, Adam Smith published The Wealth of Nations, in which he argued that: |
| | A) | England should let the American colonies have their independence to become a wealthy nation. |
| | B) | a country has an absolute advantage when it is more efficient than any other country in producing it. |
| | C) | services are just as important as products in building the wealth of a nation. |
| | D) | England should begin developing a new approach to economics with the advent of the Industrial Revolution. |
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| 10 | |
According to __________________________, it makes sense for a country to specialize in the production of those goods that it produces most efficiently and to buy the goods that it produces less efficiently from other countries, even if this means buying goods from other countries that could produce more efficiently itself. |
| | A) | Adam Smith’s Wealth of Nations |
| | B) | the Samuelson critique |
| | C) | Vernon’s product life-cycle theory |
| | D) | Ricardo’s theory of comparative advantage |
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| 11 | |
An important criticism of the benefits of free trade that focuses on the relationships between richer and poorer economies is known as _____________________. |
| | A) | the Leontief Paradox |
| | B) | the Samuelson Critique |
| | C) | the New Trade Theory |
| | D) | Porter’s Diamond |
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| 12 | |
Most economists prefer the Heckscher-Ohlin theory to Ricardo’s theory because ___________________. |
| | A) | it reflects the new realities of Industrial Revolution into the 20th century |
| | B) | it makes fewer simplifying assumptions |
| | C) | it can be conclusively demonstrated |
| | D) | Heckscher and Ohlin won the Nobel Prize in Economics |
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| 13 | |
Under new trade theory, government subsidies could ________________ the chances of its firms becoming first movers in emerging industries. |
| | A) | eliminate for all practical purposes |
| | B) | decrease |
| | C) | increase |
| | D) | assure |
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| 14 | |
Michael Porter invented a “diamond” model to show how competitive advantage best works. Which of these is not a component of his diamond model? |
| | A) | Factor endowments |
| | B) | Demand conditions |
| | C) | Operative restrictions |
| | D) | Firm strategy |
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| 15 | |
Since businesses are often prime beneficiaries of free trade, under Porter’s theory businesses should: |
| | A) | always lobby for free trade. |
| | B) | maintain a low profile to continue to enjoy significant tax advantages. |
| | C) | avoid lobbying for ethical, political and public relations reasons. |
| | D) | lobby governments to support each component of the diamond. |
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