QUESTION According to the new trade theory, how does trade offer an opportunity for mutual gain when countries do not differ in their resource endowments or technology? A. Trade results in a contraction of the size of the markets of individual firms. B. Trade allows for production of products at higher prices. C. Trade increases […]
QUESTION Vernon argues that early in the life cycle of a typical new product, while demand is starting to grow rapidly in the United States, demand in other advanced countries: A. remains limited to high-income groups. B. necessitates production of that product in those countries. C. necessitates outsourcing of production to low-cost locations. D. raises […]
QUESTION According to the new trade theory: A. the ability to capture first-mover advantages is restricted in a world that disallows trade. B. differences in labor productivity between nations underlie the notion of comparative advantage. C. a country may predominate in the export of a good because it has firms that were among the first […]
QUESTION According to Vernon, which of the following factors obviates the need for pioneering U.S. firms to look for low-cost production sites in other countries? A. The uncertainties and risks inherent in introducing new products are very low. B. The demand for most new products tends to be based mainly on price. C. U.S. labor […]
QUESTION The economic and strategic advantages that accrue to early entrants in an industry are called: A. first-mover advantages. B. comparative advantages. C. absolute advantages. D. economies of scale. E. factor endowments. ANSWER A
QUESTION Vernon predicts that as the demand for a new product starts to grow in other advanced countries, in the long run: A. the cost of labor in these advanced countries begins to increase. B. it becomes profitable for foreign firms to invest in production facilities in the United States. C. the firms in the […]
QUESTION Which of the following advantages is most likely to be enjoyed by a company as a part of the first-mover advantages? A. Increasing returns to specialization B. A positive-sum game due to lack of competition C. The ability to capture scale economies ahead of later entrants D. Absolute advantage and higher efficiency E. The […]
QUESTION Vernon theorizes that as the market in the United States and other advanced nations matures: A. it necessitates exports from the United States to those countries. B. it is no longer worthwhile for foreign producers to produce for their home markets. C. it obviates the need to look for low-cost production sites in other […]
QUESTION Which of the following is a drawback of the product life-cycle theory? A. Its relevance in the modern world seems limited. B. It makes many simplifying assumptions. C. It fails to explain the pattern of international trade during the period of American global dominance. D. It fails to explain what happens when a product’s […]
QUESTION According to Vernon, which of the following influences the movement of the locus of global production from advanced countries to developing countries? A. Cost considerations B. Factor endowments C. Domestic competition D. Supporting industries E. Firm structure ANSWER A
