Exam 2 According to Michael porter factor endowments can be affected by subsides, policies toward capital markets, and policies toward education True Mercantilism as advocated in the 16th and 17th centuries should sim. Encourage both imports and exports False David Ricardo’s theory of competitive advantage was the first to explain why unrestricted free trade is beneficial to a country False David Ricardo advanced the: Comparative advantage theory The flaw with mercantilism was that viewed trade as a Zero sum game Which of the following theories of international trade was advanced by Adam Smith? Theory of absolute adv Country A specializes in producing more efficient Comparative advantage What was Samuelson’s criticism of free trade? Argue did not make up for the wage losses in the rich country According to Hecksher-Ohlin theory the pattern of international trade is determined by differences inFactor endowments US exports were less capital intensive than US imports …. Ohlin theory would predict Leontief ** The new trade theory suggests that a country may predominate in the export of a good simply because it was lucky enough to have one or more pioneering firms to produce that goodFalseRaymond Vermons theory of the product life cycle was based on the observation that for most of the 20th century a very large proportion of the worlds new products were developed by foreign nations and sold first in the US Market False ** Vernon predicts that as the demand for a new product starts to grow in other advanced countries It is not worthwhile for firms in those countries to start producing the new product If a national market is small there may not be enough demand to enable producers to realize for certain products Economies of scale One of the implications of the new trade theory is that: Nations benefit from trade irrespective of resource endown and tech According to Porters diamond a nation’s position in elements of production such as skilled labor or the infrastructure necessary to compete in a given industry is best referred to as: Factor endowments Porters thesis was that four broad attrib First mover advantages Porter maintains that two additional variables Chance and government Which of the following factor endowments would be classified as an advanced factor by Michael Porter Skilled Labor Specific tariffs are levied as a proportion of the value of the imported goods FalseTarriffs are largely pro-producers and anti-consumer True Tariffs cause damage to _____ because this group must pay more for certain imports Consumers Which of the following is a government payment to a domestic producer Subsidy An ____ is a quota on trade imposed by the exporting country Voluntary export restraintIf Apple won an order to sell 500 of its New Voluntary export restraint In the context of international trade ______ is defined as selling goods in a foreign market Dumping ____ Arguments for government intervention into international trade are typically concerned with boosting the overall wealth of a nation Economic According to Paul Krugman, a country that attempts to use strategic trade policy to establish a domestic firm Provoke retaliation The main gains from subsidies accrue to importers, whose international competitiveness is increased as a result of these subsidies False Protecting consumers from dangerous products and furthering the goals of foreign policy are types of economic arguments for intervention False By lowering production costs ____ help domestic producers compete against foreign imports Subsidies The two US agencies that deal with antidumping complaints are the: Commerce Dept and International Trade Commission According to ___ many developing countries have a potential comparative advantage in manufacturing industries cannot initially compete with well established industries in developed countries Infant Establish under US leadership in 1947 which of the following was multilateral agreement GATT Which of the following has taken over responsibility to arbitrate trade disputes and monitor the trade policies of member countries and resulted because of the Uruaguay World trade org Greenfield investment involves the estab TrueThe stock of foreign direct investment refers to the total True With developed nations still accounting for the largest shares of FDI inflows, FDI into developing nations has steadily decreased over the past decade FalseOffshore production refers to FDI undertaken to serve the host market True Why has FDI grown more rapidly than world trade? Decline in trade barriers According to the text, a firm will favor FDI over exporting as an entry strategy when: Transportation costs / trade barriers The argument that combining location specific assets or resource endowments and the firms own unique assets often requires FDI, it requires the firm to establish production facilitates where those foreign Electic paradigm By limiting imports through quotas and tariffs, governments increase the attractiveness of the alternative: FDI & licensing In the 1960s RCA licensed its leading – edge color television technology to a number of Jap companies which later took over the market. This demonstrates that licensing: Does not give a firm the tight control over manufacturers When two or more enterprises encounter each other in different regional markets, national markets, or industries and ____ arisesMultipoint competition According to Dunning, it makes sense for a firm to locate production facilities in those countries where the cost and skills of local labor is most suited to its particular production processes because: Labor is not internationally mobile According to the ___ view FDI has both benefits and costs and should be allowed only if the benefits outweigh the costs Free MarketAccording to the text which one of the following is a home country benefit source to FDI Home country MNE All members nations in a free trade area are required to arrive at common trade policies with regard to nonmembers. False The European Parliament is responsible for proposing EU legislation, implementing it, and monitoring compliance with EU laws by member states. True Which three countries implemented Canada mexico and US Which term is used to refer to a group of countries committed to removing Free trade area ** Three countries enter into a agreement to remove all tariffs and barriers for trade between them. They decide on a common trade policy with regard Political Union The two main