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67) Factor endowments refer to the extent to which a country
A) supports education, research, and development.
B) develops the infrastructure to support industrialism.
C) supports free trade.
D) has such resources as land, labor, and capital.
68) China has the infrastructure and the skilled labor that has enabled it to become a world
manufacturing leader. This relates to which of Porter's attributes of a nation?
A) firm strategy, structure, and rivalry
B) related and supporting industries
C) demand conditions
D) factor endowments
69) The ________ theory was based on the observation that for most of the twentieth century a
very large proportion of the world's new products had been developed by U.S. firms and sold first
in the U.S. market.
A) product life-cycle
B) Heckscher-Ohlin
C) new trade
D) Ricardo
70) Economies of scale have a number of sources, including the ability
A) to average out the variable costs of production.
B) of large-volume producers to utilize specialized employees and equipment.
C) to adjust the scale of production based upon product saturation in the marketplace.
D) to utilize nonspecialized employees interchangeably.
71) One of the advantages of being the first mover in a market is
A) there is little risk involved.
B) to benefit from a higher cost structure.
C) the ability to capture scale economies ahead of later entrants.
D) local governments are more favorable to the first movers.
72) The variety of goods that a country can produce is limited by the size of the market in
industries where ________ are important.
A) factor endowments
B) current account deficits
C) economies of scale
D) current account surpluses
73) Diminishing returns to specialization occur when
A) each additional unit is produced with lesser number of laborers.
B) a nation's gross domestic product declines for a few years.
C) production possibility frontier appears as a rectangle.
D) more units of resources are required to produce each additional unit.
74) What will happen, according to Paul Samuelson's critique, if a rich country enters into a free
trade agreement with a poor country?
A) Both the countries will incur losses due to the exchanges between them.
B) The productivity of the poor country will decline rapidly.
C) The poor country will rapidly improve its productivity.
D) Both the countries will garner benefits from the exchanges between them.
75) The simple comparative advantage model assumed that trade
A) changes efficiency with which a country utilizes resources.
B) changes a country's stock of resources.
C) allows for dynamic changes in the marketplace.
D) does not change a country's stock of resources.
76) Company A entered the production of office software before its competitors. Because of this,
the company's products are more familiar among and favored by customers. This situation
exemplifies the
A) first-mover advantage.
B) diminishing marginal returns.
C) economies of scale.
D) constant marginal returns.
77) Which of the following theories suggests that first-mover advantage is significant in the export
of a good?
A) product life-cycle theory
B) Ricardo's theory
C) new trade theory
D) theory of comparative advantage
78) New trade theory suggests that nations
A) increase their commitment to research and development.
B) adopt policies that promote strong competition within domestic markets.
C) cannot benefit from trade when they do not differ in resource endowments or technology.
D) may benefit from trade even when they do not differ in resource endowments or technology.
79) The commercial aircraft industry can support only a limited number of firms, largely because
the existence of established firms would make it difficult to be competitive. This is a basic tenet of
A) mercantilism.
B) the theory of absolute advantage.
C) Heckscher-Ohlin theory.
D) new trade theory.
80) Which of the following theories stress the role of luck, entrepreneurship, and innovation in the
production and export of a good or service by the firms in a country?
A) product life-cycle theory
B) Ricardo's theory
C) theory of comparative advantage
D) new trade theory
