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International Business, 12e (Hill)
1) The theories of Smith and Ricardo show that a country should engage in international trade,
even for products that it is able to produce for itself.
2) Porter's theory of national competitive advantage recommends unrestricted free trade between
countries.
3) Heckscher-Ohlin theory supports the case for unrestricted free trade between nations.
4) Mercantilist doctrine advocates unrestricted free trade between countries.
5) A country has an absolute advantage in the production of a product when it is more efficient
than any other country in producing it.
6) Factor endowments refer to the extent to which a country is gifted with such resources as land,
labor, and capital.
7) Heckscher-Ohlin theory stresses that comparative advantage arises from differences in
productivity.
8) Ricardo's theory makes fewer simplifying assumptions compared to Heckscher-Ohlin theory.
9) A key assumption in the Heckscher-Ohlin theory is that technologies are the same across
countries.
10) Some of the arguments made by the product life-cycle theory seem ethnocentric and
increasingly dated when viewed from an Asian or European perspective.
11) XYZ Toys manufactures and sells small quantities of each of its products, but it can still
benefit from economies of scale.
12) The simple model of free trade assumed away transportation costs between countries.
13) Resources always move easily from one economic activity to another.
14) Diminishing returns show that it is feasible for a country to specialize to the degree suggested
by the simple Ricardian model.
15) According to Paul Samuelson's critique, a poor country will rapidly improve its productivity if
a rich country enters into a free trade agreement with it.
16) Apple's iPhone was unique when it first came out, with many features that no other phones
had. As such, it enjoyed great success and dominated the cell phone market. This demonstrates the
first-mover advantage.
17) New trade theorists stress the role of luck in giving a firm first-mover advantages.
18) According to the new trade theory, firms that establish a first-mover advantage with regard to
the production of a particular new product may subsequently dominate global trade in that product.
19) From a profit perspective, it makes sense for firms to disperse their productive activities to
those countries where they can be performed most efficiently.
20) ________ refers to a situation where a government does not attempt to influence through
quotas or duties what its citizens can buy from another country.
A) Fair trade
B) Trade theory
C) Free trade
D) Mercantilism
21) Identify the theory that supports the view that, in some cases, countries export for the reason
that the world market can support only a limited number of firms.
A) Heckscher-Ohlin theory
B) Smith's theory
C) Ricardo's theory
D) new trade theory
22) Country A exports electronic goods from Country B although there are no underlying
differences in factor endowments between the two countries. Which of the following theories
explains this anomaly?
A) comparative advantage theory
B) new trade theory
C) Ricardo's theory
D) Smith's theory
23) Which of the following observations is consistent with Michael Porter's theory of national
competitive advantage?
A) Factors such as domestic demand and domestic rivalry explain nations' dominance in
production.
B) Countries should produce only those goods for which they have a comparative advantage.
C) Interplay between the factors of production cause international marketing decisions.
D) International differences in labor productivity determine nations' supremacy in production.
24) Which of the following is a theory that can be used to justify limited government intervention
to support the development of certain export-oriented industries?
A) comparative advantage theory
B) Ricardo's theory
C) new trade theory
D) Heckscher-Ohlin theory
25) Which of the following refers to a situation where a government does not attempt to influence
through quotas or duties what its citizens can buy from another country?
A) economic patriotism
B) protectionism
C) free trade
D) offshoring
26) Which of the following is a major benefit of engaging in free trade?
A) It helps to reduce the financial volatility in global markets.
B) It helps countries protect the jobs that are available to their citizens.
C) It gives countries access to products that they cannot produce.
D) It allows governments to exert more control on businesses.
