QUESTION New trade theory argues that, through its impact on economies of scale, trade can: A. increase the average costs of goods. B. enable the global market to support a wide range of enterprises. C. negatively affect the first-mover advantage for all products. D. increase the variety of goods available to consumers. E. prevent diminishing […]
QUESTION According to the new trade theory, trade, through its impact on economies of scale, is most likely to: A. reduce the volume of the goods produced. B. decrease the variety of goods available to consumers. C. decrease the average costs of goods. D. inhibit first-mover advantages in all industries. E. benefit only nations that […]
QUESTION The new trade theory states that: A. the locus of global production initially switches from the United States to other advanced nations. B. world trade in certain products may be dominated by countries whose firms were first movers in their production. C. differences in technology may lead to differences in productivity, which in turn […]
QUESTION Which of the following is a result of certain products having small national markets, in the absence of trade? A. The variety of products available to consumers increases. B. Limited demand for such products leads to non-realization of economies of scale. C. Each nation will specialize in producing a narrower range of products than […]
QUESTION Which of the following theories states that in those industries where the output required to attain economies of scale represents a significant proportion of total world demand, the global market may be able to support only a small number of enterprises? A. Heckscher-Ohlin B. Comparative advantage C. Product life-cycle D. New trade E. Absolute […]
QUESTION According to the new trade theory, which of the following is most likely to be a result of market expansion due to trade? A. A wide variety of products is produced at greater unit costs than in the absence of trade. B. As the variety of products increases, demand for individual products decreases, leading […]
QUESTION According to the product life-cycle theory, the high cost of U.S. labor gave U.S. firms an incentive to: A. lower costs of services to offset a fall in demand. B. develop cost-saving process innovations. C. invite foreign direct investment in domestic industries. D. embrace and promote open market capitalism. E. import new consumer products […]
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 Which of the following suggests that trade is a positive-sum game in which all participating countries fetch economic gains? A. The Heckscher-Ohlin theory B. Mercantilism C. The theory of comparative advantage D. Leontief’s paradox E. The Samuelson critique ANSWER C
QUESTION Consider two countries Daria and Atlantis. Daria is a major producer of wheat and rice while Atlantis specializes in the production of fertilizers and manufacturing equipment. Engaging in free trade benefits both countries since Daria is an agrarian nation and Atlantis lacks arable land. This follows the theory of comparative advantage, and we can […]
