1. How mercantilism works?

Mother country exports finished products at high prices to colonies A&B and these colonies A&B
import raw materials at low prices in our mother country. These raw materials will be used to make
products that will be exported back to them.

2. Pros & cons of mercantilism

Pros of Mercantilism:
1. Promotes economic growth.
2. Supports domestic industries.
3. Accumulates wealth through trade.
Cons of Mercantilism:
1. Can lead to trade imbalances.
2. Encourages protectionist policies.
3. Hinders international cooperation.

3. How does IBT theories affect the economy?

It affects the economy by shaping economic policies, trade relationships, and investment decisions.
They can either promote or hinder economic growth and stability depending on how these theories
are applied and adapted by governments and businesses. The application of these theories can lead to
more efficient resource utilization, enhanced competitiveness, and increased economic growth.

IBT provides the theoretical foundations for understanding and managing global economic
interactions. These theories serve as guiding principles that inform the decisions made by
governments and businesses concerning international trade, investments, and economic policies.
Their influence extends to various aspects of the economy, such as trade balances, economic growth,
and the competitiveness of industries. As a result, the application and adaptation of IBT in practice
have a significant impact on shaping economic outcomes in the complex landscape of international
business.

4. Comparative advantage vs Absolute advantage

Comparative advantage is when a country can produce a good at a lower opportunity cost than
another country, while absolute advantage is when a country can produce more of a good with the
same resources. Comparative advantage is a broader concept, often used in trade theory.
Absolute advantage focuses on being the best at producing a specific product, while comparative
advantage emphasizes producing the product with the lowest opportunity cost. Comparative
advantage is more widely applied in international trade theory and encourages countries to specialize
in what they do relatively best, leading to more efficient resource allocation and trade.

5. Which IBT theory is more relevant today?

The "Modern Investment Theory" is the most relevant today because it provides insights into how
businesses make strategic decisions regarding international investments. It offers valuable insights
into the strategic decisions that businesses make in the world of international commerce, influencing
economic interactions on a global scale.

6. Purpose of IBT theories

IBT theories serve as tools that help businesses and governments understand and make smart
decisions in international trade and global business. They guide planning, risk management, and
resource use, which helps economies grow and people prosper in the worldwide marketplace.

The purpose of International Business Theories (IBT) is to provide frameworks and principles for
businesses and governments to make informed decisions in the complex world of international trade,
 investment, and market expansion. They help in understanding, managing risks, improving
efficiency, enhancing competitiveness, and guiding policy development in the global economy.

7. Theory of economic development

The theory of economic development focuses on strategies and policies to improve a nation's
economic growth and living standards. It explores how countries can advance their economies,
reduce poverty, and enhance overall well-being through factors like infrastructure development,
education, and fostering a favorable business environment. In short, it transforms under developed
countries in to a more developed country.

8. Why is Rostow’s theory the most influential? Explain.

It provides a simplified roadmap that outlines a nation's development journey, from a traditional
society to an age of high mass consumption. This structured framework helps governments and
organizations plan and make informed decisions about development. It also aids in facilitating a
deeper understanding of how economies progress and transform over time. This model makes it a
practical tool for governments and businesses to plan and strategize their economic growth.

9. Why IBT theories are important?

IBT theories are important for businesses and governments as they offer structured frameworks and
principles that aid in understanding international trade and business. They guide in decision-making,
reduce risks, and optimize opportunities in the global economy, and they help organizations and
policymakers make sound, informed decisions that lead to successful international engagements, and
they contribute to economic development and global prosperity, contributing to sustainable growth
and stability.

10. 1st thing to consider before entering IBT?

Before venturing into International Business, conducting thorough market research should be the
initial priority. This involves gaining a deep understanding of the specific market conditions, cultural
differences, legal requirements, and potential competitors in the target country. Additionally,
assessing the economic, political, and social factors impacting the market is essential. Such
comprehensive research forms the foundation for strategic planning and decision-making,
minimizing risks and maximizing opportunities in the complex world of international business.

11. Give all types of mercantilism theory. Explain difference.

1. Export-Led: Emphasizes promoting exports and achieving a trade surplus.
2. State-Led: Involves strong government intervention and regulation of the economy.
3. Colonial: Associated with colonial powers exploiting colonies for resources and markets.
4. Industrial: Focuses on developing domestic industries, manufacturing, and technological
advancement.
5. Financial: Concentrates on accumulating precious metals and maintaining positive balances in
payments.

12. Explain the Rostow’s stages of economic growth theory

This theory provides a structured framework for understanding a country's development progress.
1. Traditional Society: The economy has limited technology and low-income levels.
2. Preconditions for Take-off: Initiatives like infrastructure development and education set the stage
for economic growth.
3. Take-off: Economic growth accelerates, with expanding industries and rising incomes.
4. Drive to Maturity: A diversified economy further develops, improving living standards.
5. Age of High Mass Consumption: The economy reaches stability, characterized by high incomes
and consumption.
13. Human capital vs Identical preferences
Human Capital Approach Theory: Focuses on manpower, investing in education and skills to
enhance the productivity of the workforce and drive economic growth.
Identical Preferences Theory: Assumes consumers have the same tastes and preferences, simplifying
economic analysis but doesn't account for the diversity of preferences and tastes that exist in reality.

14. Give all IBT theories and explain the difference

1. Mercantilism Theory: Focuses on accumulating wealth through exports, protectionist policies, and
acquiring precious metals. It emphasizes a trade surplus.
2. Absolute Advantage: Highlights a country's ability to produce a good more efficiently than
another, using fewer resources.
3. Comparative Advantage: Emphasizes producing goods where the opportunity cost is lower relative
to other goods, promoting specialization and trade.
4. Factor Endowment Theory: Suggests that countries should specialize in industries that align with
their resource endowments, such as labor, capital, or natural resources.
5. Theory of Economic Development: Explores strategies for improving a nation's economic growth,
including infrastructure development, education, and policy reforms.
6. Rostow's Stages of Economic Growth Theory: Provides a framework for understanding a nation's
economic development in five stages, from traditional society to high mass consumption.
7. Human Capital Approach Theory: Emphasizes investing in education and skills to enhance
workforce productivity and economic growth.
8. Identical Preferences Theory: Assumes that consumers worldwide have the same tastes and
preferences, simplifying economic models but overlooking diversity.
9. Strategic Trade Theory: Discusses how governments can support domestic industries in global
markets by strategic trade policies.
10. Modern Investment Theory: Focuses on foreign direct investment (FDI) and multinational
enterprises (MNEs) and the impact on international business.
11. International Product Life Cycle Theory: Discusses the life cycle of a product and how it impacts
international trade and investment strategies.

The differences among these theories lie in their fundamental principles, objectives, and areas of
focus, providing a range of perspectives on international business, trade, and economic development.
Each theory serves as a valuable tool for understanding and making decisions in the global business
environment.