Global Business Today Study Set 7

Business

Quiz 6 :

International Trade Theory

Quiz 6 :

International Trade Theory

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Free trade exists when there is no government influence on what citizens can buy from another country or sell to another country.
Free
True False
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True

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Raymond Vernon's product life-cycle theory was based on the observation that for most of the twentieth century a very large proportion of the world's new products were developed by the firms situated in Germany and sold first in the German market.
Free
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False

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First-mover advantages are gained by those companies that are the early entrants to an industry.
Free
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True

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Mercantilism asserted that gold and silver were the mainstays of national wealth and essential to vigorous commerce.
True False
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According to the product life cycle theory, as demand for a product grows rapidly in the United States, it will also grow rapidly in other advanced nations and diminish potential exports from the United States.
True False
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Mercantilism, propagated in the sixteenth and seventeenth centuries, advocated that countries should discourage exports.
True False
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Adam Smith disagreed with the mercantilist assumption because he believed that countries differ in their ability to produce goods efficiently.
True False
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New trade theory suggests that world trade in certain products will likely be dominated by countries who acted as late-movers and took advantage of existing innovations.
True False
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Free trade is likely to increase a country's stock of resources and the efficiency with which it utilizes those resources.
True False
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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.
True False
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The factor endowments of a country refer to government resources made available to help businesses.
True False
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According to Adam Smith, government policy should determine a country's imports and exports.
True False
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Those who follow the mercantilist doctrine would not want government intervention to be the reason for a surplus in the balance of trade.
True False
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Vernon's product life cycle theory was based on the idea that most new products were initially produced in the United States.
True False
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According to the product life-cycle theory, the locus of global production initially switches from developing countries to other advanced nations and then from those nations to the United States.
True False
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New trade theory stresses that in some cases countries specialize in the production of particular products because of underlying differences in factor endowments.
True False
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According to the theory of comparative advantage, potential world production is greater with unrestricted free trade than it is with restricted trade.
True False
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Factor endowments are unit cost reductions associated with a large scale of output.
True False
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The Heckscher-Ohlin theory is considered the best predictor of real-world international trade patterns.
True False
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The theory of free trade is enhanced by the idea that resources typically move easily from one economic activity to another and allow nations to adapt quickly.
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