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Exam 5: International Trade Theory

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Question 31

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According to Heckscher and Ohlin,_____ meant the extent to which a country is provided with such resources as land,labor,and capital.

A) factors of production
B) economic facilitators
C) factor endowments
D) manufacturing factors

E) A) and C)
F) All of the above

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Question 32

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This theory,advanced by the 19^th-century English economist David Ricardo,forms the intellectual basis of the modern argument for unrestricted free trade.

A) Heckscher-Ohlin
B) Mercantilism
C) Comparative advantage
D) Absolute advantage

E) A) and D)
F) C) and D)

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Question 33

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What are the benefits of free trade?

The Heckscher-Ohlin theory has proven to be a powerful explanation of world trade patterns.

The simple comparative advantage model assumes that trade does not change a country's stock of resources or their utilization efficiency.If we relax this assumption to make allowances for dynamic changes,all of the following become apparent except:

The Heckscher-Ohlin theory emphasizes the interplay between the proportions in which the factors of production are available in different countries and the proportions in which they are needed for producing particular goods.

Limits on imports are often in the interests of domestic consumers,but not domestic producers.

The main tenet of mercantilism was that it was in a country's best interest to maintain a trade:

What is the role of government in Porter's theory?

Because a growing number of new products are now introduced simultaneously in the United States,Japan,and the advanced European nations,Vernon's product life-cycle is limited in explaining world trade patterns.

Contrary to what the Heckscher-Ohlin theory would predict,the United States has been a primary importer rather than an exporter of capital goods.This phenomenon is referred to as the _____ paradox.

Explain the Heckscher-Ohlin theory.What is the relationship between Heckscher-Ohlin's work and the theory of comparative advantage?

Adam Smith's basic argument is that a country should produce goods at home even if it can buy at a lower cost from other countries.

The theory of comparative advantage suggests that trade is a zero-sum game in which all countries that participate realize economic gains.

According to the _____,the United States is a major player in the commercial jet aircraft industry because American firms were first movers in the world market.

Which theory predicts that countries will export those goods that make intensive use of factors that are locally abundant,while importing goods that make intensive use of factors that are locally scarce?

Trade produces net gains for all involved and hence is a:

Explain the product life-cycle theory.

In general,economic studies suggest that countries that adopt a more open stance toward international trade enjoy higher growth rates than those who keep their economies closed to trade.

How did David Ricardo extend Adam Smith's work? Explain the theory of comparative advantage.