QUESTION Vernon argues that pioneering firms in the United States kept production facilities closer to the market and centers of decision making because: A. of the uncertainty and risks inherent in introducing new products. B. they believed that foreign production facilities were inferior in technical skills. C. they believed that U.S. labor costs were much […]
QUESTION Argonia and Selenia have specialized in the production of industrial equipment and pharmaceuticals respectively. Argonia exports industrial equipment to Selenia, which in turn exports chemicals and medicines to Argonia. According to the theory of comparative advantage, this mutually beneficial trade relationship best illustrates: A. the significance of trade barriers. B. a positive-sum game. C. […]
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 […]
QUESTION Diminishing returns to specialization occur when: A. resources can move freely from the production of one good to another within a country. B. more units of resources are required to produce each additional unit. C. the cost of producing goods reduces substantially with increase in number of goods produced. D. the quality of resources […]
QUESTION Which of the following statements best indicates Samuelson’s criticism of free trade? A. Dynamic gains lead to a universally beneficial outcome for all countries. B. Offshoring service jobs that were traditionally mobile will increase the market clearing wage rate. C. Free trade has historically been beneficial only to developing countries. D. By importing cheap […]
QUESTION One of the rebuttals to Samuelson’s critique of the free trade model is that: A. the United States’ ability to achieve constant returns to specialization is unparalleled. B. the strict immigration policies of the United States help insulate the economy from inward migration. C. introducing trade barriers may in fact be beneficial to developed […]
QUESTION Which of the following is a reason for diminishing rather than constant returns to specialization? A. All resources are of the same quality. B. Resources can shift from the production of one good to another seamlessly. C. Each country has a fixed stock of resources. D. Different goods use different resources in different proportions. […]
QUESTION Considered to be the first theory of international trade, the principal assertion of mercantilism is that: A. countries differ in their ability to produce goods efficiently. B. gold and silver are the mainstays of a country’s wealth and essential to vigorous commerce. C. countries should specialize in the production of goods for which they […]
QUESTION According to Michael Porter, government can influence each of the four components of Porter’s diamond—either positively or negatively. Indicate whether the statement is true or false. ANSWER TRUE Porter contends that government can influence each of the four components of Porter’s diamond—either positively or negatively. Factor endowments can be affected by subsidies, policies […]
