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85) Software development is an expensive process, but manufacturers are able to spread out the
costs of the development over the hundreds of thousands of software packages sold to consumers.
What is helping to drive down costs per unit in this situation?
A) antidumping measures
B) economies of scale
C) diminishing returns
D) labor productivity
E) first-mover advantages
86) According to new trade theory, trade, through its impact on economies of scale, is most likely
to
A) reduce the volume of the goods produced.
B) decrease the variety of goods available to consumers.
C) decrease the average costs of goods.
D) inhibit first-mover advantages in all industries.
E) benefit only nations that differ in resource endowments or technology.
87) What might result in the absence of trade, if certain products have small national markets?
A) The variety of products available to consumers increases.
B) Limited demand for such products leads to non-realization of economies of scale.
C) Each nation will specialize in producing a narrower range of products than it would in the
presence of trade.
D) At low volumes of production, unit costs and prices would be lowered.
E) The first movers in an industry may get a lock on the world market that discourages subsequent
entry.
88) According to new trade theory, what is most likely to be a result of market expansion due to
trade?
A) A wide variety of products is produced at greater unit costs than in the absence of trade.
B) As the variety of products increases, demand for individual products decreases, leading to
non-realization of economies of scale.
C) Each nation may specialize in producing a narrower range of products, importing goods that it
does not make.
D) The ability to capture first-mover advantages is restricted in a world that allows trade.
E) When countries do not differ in their resource endowments or technology, trade does not offer
mutual benefits.
89) New trade theory dictates that trade offers an opportunity for mutual gain when countries do
not differ in their resource endowments or technology because trade
A) results in a contraction of the size of the markets of individual firms.
B) allows for production of products at higher prices.
C) increases the variety of goods available to consumers and lowers the costs of those goods.
D) allows countries to attain self-sufficiency in the production of all goods.
E) guarantees first-mover advantages to all the countries that engage in trade.
90) Mallory works for a company that produces cell phone component parts. Her company
developed a component that no competitor had and was soon enjoying economies of scale as the
only producers of the part. Which trade theory is most reflected in the success of this company?
A) Product-life cycle
B) Absolute advantage
C) New trade theory
D) Mercantilism
E) Comparative advantage
91) The economic and strategic advantages that accrue to early entrants in an industry are called
A) first-mover advantages.
B) comparative advantages.
C) absolute advantages.
D) economies of scale.
E) factor endowments.
92) Airbus pioneered the development of the new superjumbo jet at a cost of $15 billion. It quickly
obtained contracts for much of the 400 units that are expected to be ordered in the next 20 years,
thereby effectively shutting out its competitor, Boeing. Airbus benefits from
A) first-mover advantages.
B) comparative advantages.
C) absolute advantages.
D) economies of scale.
E) factor endowments.
93) What is an advantage that is realized by a company as a part of first-mover advantages?
A) increasing returns to specialization
B) positive-sum game due to lack of competition
C) ability to capture scale economies ahead of later entrants
D) absolute advantage and higher efficiency
E) ability to specialize in the production of a particular product
94) One of the suggestions of new trade theory is that
A) differences in technology leads to differences in productivity, which in turn, drives
international trade patterns.
B) nations may benefit from trade irrespective of resource endowments or technology.
C) the demand for most new products tends to be based on nonprice factors.
D) globally dispersed production reduces the production costs of mature products.
E) comparative advantage does not arrive from a difference in factor endowments but from a
difference in productivity.
95) One barrier to subsequent entries in an industry dominated by first movers is
A) a laissez-faire stance toward trade adopted by first movers.
B) implementation of policies to maximize imports and minimize exports.
C) specializing in the production of goods for which firms have a comparative advantage.
D) the ability of first movers to benefit from increasing returns.
E) a decrease in the variety of goods available to consumers and increase in the cost of existing
goods.
96) The new trade theory is at variance with which theory, which suggests that a country will
predominate in the export of a product when it is particularly well endowed with those factors used
intensively in its manufacture?
A) Heckscher-Ohlin
B) product life-cycle
C) comparative advantage
D) absolute advantage
E) national competitive advantage
97) New trade theory supports the ideas that trade increases specialization of production and it also
A) lowers average prices.
B) decreases the number of available products.
C) is not dependent on government intervention to succeed.
D) distances itself from customization of products.
E) is reliant upon factor endowments.
98) One of the most controversial aspects of ________ is that it supports government intervention
and strategic trade policy.
A) the theory of absolute advantage
B) the theory of comparative advantage
C) Heckscher-Ohlin theory
D) new trade theory
E) product life-cycle theory
99) The new trade theory diverts from its advocacy of free trade by suggesting that
A) the price of a new product increases along with the increase in the popularity of the product.
B) nations benefit from trade even in the absence of resource endowments and technology.
C) there is an economic rationale for a proactive trade policy.
D) the role of luck, entrepreneurship, and innovation is important in giving a firm first-mover
advantages.
E) market expansion leads to better realization of economies of scale.
100) The purpose of Porter's study of national competitive advantage was to
A) identify the various stages of the life cycle of a product.
B) determine why a country achieves international success in a particular industry.
C) determine how trade barriers affect the prices of products in the international market.
D) determine how pre-industrialization theories predict international trade patterns.
E) organize the relationship between factor endowments and economies of scale.
101) Factor endowments, demand conditions, related and supporting industries, and ________ are
the four broad attributes that make up Porter's Diamond Model
A) firm strategy, structure, and rivalry
B) diminishing returns
C) government intervention policies
D) first-mover advantages
E) staff hierarchy and training
102) What most accurately describes the four attributes that make up Porter's diamond?
A) Absence of any single attribute does not impact effectiveness of the diamond.
B) The effect of one attribute is contingent on the state of others.
C) The diamond is not a mutually reinforcing system.
D) Chance events, such as major innovations, do not affect Porter's diamond.
E) Only in the absence of one of the four attributes can government policies influence Porter's
diamond.
103) Consideration of competitors is taken into account in which attribute of Porter's diamond?
A) purchasing power parity
B) factor endowments
C) economies of scale
D) firm strategy, structure, and rivalry
E) demand conditions
104) Which factor endowment would be classified as a basic factor by Michael Porter?
A) communication infrastructure
B) research facilities
C) natural resources
D) skilled labor
E) technological know-how
105) Porter believed that two additional variables can influence the national diamond along with
the four original attributes. What are those two additional variables?
A) education and geography
B) nature and nurture
C) competition and globalization
D) chance and government
E) geography and history
106) Which component of Porter's diamond is particularly important in shaping the attributes of
domestically made products and in creating pressures for innovation and quality?
A) basic factor endowments
B) advanced factor endowments
C) firm strategy
D) demand conditions
E) supporting industries
