In explaining international trade, the product life-cycle theory focuses on
A) local resources.
B) the role of technological innovation.
C) per-capita income levels of nations.
D) the availability of unskilled labor.

Question

Quizplus · Accepted Answer

The product life-cycle theory emphasizes the role of technological innovation in determining the patterns of international trade. It suggests that a product will be initially invented and produced in a developed country, which will then export it to other countries. As the product becomes more widely adopted, production will shift to developing countries with lower labor costs. Eventually, the product will become standardized and production will move back to developed countries or to other developing countries with competitive advantages. The theory does not focus on local resources, per-capita income levels, or availability of unskilled labor.

In Explaining International Trade, the Product Life-Cycle Theory Focuses on