QUIZ !

in BA FIN 102

Multiple Choice: Choose or highlight the letter of the correct answer.

1.What was the first economic theory of international trade developed during neoclassical era?

a,The theory of mercantilism

b.The theory of comparative advantage
c.The theory of absolute advantage
d. The Heckscher-Ohlin theory

2. According to Adam Smith, the father of Economics, trade between countries should be as if
there is an invisible hand meaning they moved _____.

a.Naturally according to the market forces

b.Under government regulation
c.Using factors that are available
d.nly when a country has an advantage

3. Mercantilists believed that a country could increase the amount of wealth it had by _____.

a.Promoting exports and discouraging imports

b.Discouraging exports and promoting imports
c.Controlling imports and exports
d.Increasing both imports and exports

4.Tariffs and quotas can also be referred to as _____.

a,free trade strategies

b.exchange rates
c.outsourcing strategies
D.trade restrictions

5.A _____ sets a numerical limit on how much of a product can be imported into a country.

a.subsidy
b.quota
c.government protection
d.free trade agreement

6 When countries specialize in the goods in which they have a comparative advantage, which of
the following is true?

a.Both countr.es will experience gains from trade.

b.Both countries are worse off.
c.One country is usually better off, and the other is worse off.
d. Production costs will increase for both countries.

7.The factor proportions theory of trade says that a country will have its best trade advantage if
it concentrates on _______

a.a.producing products using its scarce production factors

b producing products using its abundant production factors
c exporting its expensive products
d importing labor-intensive products and exporting capital-intensive ones

8. The product life cycle (PLC) theory of trade holds that _______.

a. durable products will be exported more than perishable ones

b .exports will be higher for products that go through a cycle than products that do not
c .products' location of production will shift internationally depending on the stage in the life
cycle
d, countries are better off if they concentrate on products not likely to become obsolete because
of innovations

9. According to David Ricardo, a country will have a comparative advantage in:

a) Industries in which there are neither imports nor exports

b) import competing industries
c) Industries that sell to domestic and foreign buyers
d) industries that sell to only foreign buyers

10 Which of the following statements would a mercantilist NOT agree with?

a) Imports are desirable
b) Trade is a zero-sum activity.
c) The purpose of trade is to amass revenues from exports.
d) Policies should promote exports and discourage imports.

11 David Ricardo's trading principle emphasis the:

a) Demand side of the market
b) supply side of the market
c) role of comparative costs
d) role of absolute costs

12 What is not a positive impact of globalization?

A Cultural Imperialism
b. New jobs and skills
C. Investment in the local economy, eg education
D. technological advancement

13. What develops when exports exceed imports?

a.Trade deficit
b.Trade surplus
c.Barrier to trade
d.Tariff

14.What cost you give up when one option is chosen from among several possibilities?

a,Opportunity cost
B. Absolute cost
C. Fixed cost
D. Variable cost

15 .Why would a company engage in franchising?

a..So that the company that purchases the license can use the business model or philosophy of
the franchisor.
b.So that a company can reduce the number of its competitors.
c.So that the company that purchases the license can gain access to a new market without
tariffs.
d.So that the company can benefit from the Six Sigma business model.

II Identify the following:(5) pts

1.The exchange of products and services across national borders, typically through exporting
and importing _INTERNATIONAL TRADE________________

2.internationalisation strategy in which the firm establishes a physical presence abroad through
the acquisition of productive assets such as capital, technology, labour, land, plant and
equipment. _FOREIGN DIRECT INVESTMENT __________________

3.A large company with substantial resources that performs various business activities through
a network of subsidiaries and affiliates located in multiple countries _______ MULTINATIONAL
ENTERPRISE (MNE)____________

4.The relative absence of restrictions to the flow of goods and services superior features of a
country - typically derived from either natural endowments or deliberate national policies - that
provide it with unique benefits in global competition between nations ________FREE
TRADE______________

5.Distinctive assets or competencies of a firm - typically derived from cost, size or innovation
strengths - that are difficult for competitors to replicate or imitate _______COMPETITIVE
ADVANTAGE_________________

III Essay 30 pts

1 What are the major differences between the theories of absolute advantage and comparative
advantage? (2 pts)
2.. Explain why do business expand internationally (6)pts
3. Briefly explain the different stages of Globalization (8)pts
4 Enumerate and briefly explain the limitations of the Classical based trade theories(3)pts
5. Enumerate and briefly explain the different approaches in the international business. 8 pts
6. In your opinion, among the different trade theories, what do you think is the best theory for
our country in order to take advantage of the benefits of international trade and business 3 pts.

1. Absolute advantage refers to a country's or company's indisputable ability to deliver a

specific good better. Comparative advantage considers opportunity cost when weighing the
pros and cons of various production capital investment choices.

2. A company or a corporation claim that international expansion is important for long-term

business development. Thru international expansion it can provide some advantages to the
firm like: 1) Market Motives- it allows the firm to expand its company’s growth because of the
opportunities. 2) Economic Motives- it allows the firm to expand its income. 3)Strategic
Motives- Firms choose internationally expansion to gain edge over their competitors. It helps
the firm to build some strong strategies.

3. The first stage is Domestic- this stage is where production and marketing are located at
home. The trade surplus may or not may exported. The second one is International, this
stage of globalization where we can find the market entry strategies, on how one entity will
decide which markets to enter. The third one is the multinational, where the domestic based
company begins to operate or manufacturing, marketing and sale in the foreign market
world. And the last one is the global, which one firm or business moves forward into global
mode operation.

4. 1.Mercantilism- Theory that maximize exports and minimize imports

2. Absolute Advantage Principle- Specialize in the production of product, export them
and import others
3.Comparative Advantage- A country is less efficiency in the production of all goods
compared to the other nation.
5. 1.Ethnocentric Approach- a domestic company enter in foreign market without changing its
marketing strategies.
2.Polycentric Approach- when the domestic market enter in the world of foreign market
without changing its marketing strategies and notice it wasn’t longer effective in the new
environment, it is essential to make some required changes in the marketing mix.
3. Regiocentric Approach- when a company managing, balance and handle its business
at international level by using its polycentric approach.
4.Geocentric Approach- When a company using the geocentric approach it consider the
world as a single country.

6. In my opinion, the best theory for us is the FACTOR PROPORTION THEORY. We all know
our country is higher and wealthy on the land and labor, which other counties don’t have.
We have the advantage to supply all the demand of others, and we have the advantage to
produce more essential goods that we can export nationwide which may lead our country to
gain more income.