Ch6: international trade theory

Scientific term:
1. Absence of barriers to the free flow of goods
and services between countries.
2. The observed pattern of trade in the world
economy may be due in part to the ability of
firms in a given market to capture first mover
advantages.
3. Equate political power with economic power
and economic power with a balance-of-trade
surplus.
4. one in which a gain by one country results in
a loss by another
5. A country has absolute advantage in
producing a product when it is more efficient
than any other country in producing it.
6. unit cost reductions associated with large
scale output.
7. four attributes of a nation that shape the
environment in which local firms compete
True or false:
1. Differences in professional standards,
licensing requirements, investment restrictions,
work visas, and tax codes have all made cross-
border trade in services more difficult than they
could be.
2. David Ricardo promoted unrestricted free
trade
3. One of the key insights of international trade
theory is that limits on imports are often in the
interests of domestic consumers but not
domestic producers.
4.In Paule Krugman's new trade theory Trade
will skew toward countries that have firms that
are able to capture first mover advantage
5. Mercantilism makes a case for government
involvement in promoting imports and limiting
exports.
6.absloute advantage theory support zero sum
gain
7. The basic message of the theory of
comparative advantage is that potential world
production is greater with unrestricted free
trade than it is with restricted trade
8. Comparative Advantage helps to recognize
why many economists believe that unrestricted
free trade between nations will raise the
economic welfare of countries that participate
in a free trade system
9. World trade in certain products may be
dominated by countries whose firms were first
movers in their production.
10. Trade is not beneficial because it allows the
specialization of production, the realization of
scale economies, the production of a greater
variety of products, and lower prices.
11. Porter also contends that government can
influence each of the four components of the
diamond—either positively or negatively.
Government can shape domestic demand
through local product standards or with
regulations that mandate or influence buyer
needs
12.International order regarding trade has been
based on rules established by World Trade
Organization

Choose:
1.what is the benefits of the trade?
A. Specialize in manufacture and export of
products that can be produced most efficiently
in that country.
B. Import products that can be produced more
efficiently in other countries.
C. Gains arise because international trade
allows a country to specialize in the
manufacture and export of products.
D. all of the above
2.what is the theory its trade patterns reflect
difference in labor productivity?
A. Heckscher-Ohlin theory
B. Raymond Vernon
C. Ricardo's theory
D.Paule Krugman’s new trade theory
3. Product life-cycle theory may not be as
relevant today because
A. Many products are now introduced in Japan
or South Korea.
B. Many new products are introduced
simultaneously into U.S., Europe, and Asia.
C. Production is often globally dispersed.
D.All of the above
4.portal’s diamond
a.factor endowments
b.demand conditions
c.related and supporting industries
d.all of the above
5. When investment risks increase, businesses
typically do three things
a. they increase their investments in risky
projects
b. they hedge their bets
c. business can and will lobby governments to
encourage them to resolve disputes and create
a more stable and predictable environment.
d. a and c are correct
e.b and c are correct