72) Which of the following is an argument offered by the new trade theory?
A) It is in line with the factor proportions theory.
B) There are gains to be made from specialization and increasing economies of scale.
C) The companies first to market forgo the opportunities to create barriers to entry.
D) Market forces alone play a role in assisting the home companies in a country.
73) The new trade theory is mainly at odds with the ________ theory.
A) international product life cycle
B) comparative advantage
C) national competitive advantage
D) factor proportions
74) National competitive advantage theory states that a nation’s competitiveness in an industry
depends on ________.
A) the capacity of companies to create barriers to entry
B) the capacity of the industry to innovate and upgrade
C) the availability of government subsidies for industry development
D) the availability of cheap factors of production in the nation
75) According to the Porter diamond, which of the following is an example of an advanced
factor?
A) labor forces in the nation
B) technological infrastructure in the nation
C) climate in the nation
D) natural resources in the nation
76) Which element of national competitive advantage theory divides resources into two groups:
basic and advanced?
A) demand conditions
B) factor conditions
C) related and supporting industries
D) firm, strategy, structure, and rivalry
Scenario: Chuck Praeger, Global Entrepreneur
Chuck Praeger has made a name for himself by selling high-quality golf equipment to customers
in Europe. He would like to expand his business into the Pacific Rim countries and has therefore,
begun making inquiries into potential distributors.
77) Chuck is convinced that his golf equipment will sell itself. But he is preparing a special
presentation for Asian customers because he wants to make a good first impression. As an expert
in culture of the Pacific Rim countries, which of the following would be your most likely advice
to Chuck?
A) Be sure to have a tight legal contract ready, to avoid product piracy problems.
B) Aggressive salesmanship is unlikely to work in Pacific Rim countries.
C) Have plenty of English-language business cards to pass around because most Asians know
English and like the language.
D) Avoid the confusion introduced by third-party contacts.
78) Chuck believes that his business has grown because of his personal involvement in every
step of the way. What advice do you offer Chuck as he continues to expand his business in new
Asian markets?
A) Contact distributors directly to avoid misunderstandings that can arise when using third-party
contacts.
B) Always stick to corporate settings when doing business to avoid misunderstandings that can
arise in less formal environments.
C) Protect your interests by insisting on detailed contracts from the start.
D) Use proper intermediaries as required in Pacific Rim nations.
Scenario: Foodland and Drinkland
Two countries, Foodland and Drinkland, produce food and drinks. In Foodland, one resource
unit produces 20 tons of food and one resource unit produces 10 tons of drinks. In Drinkland,
one resource unit produces 12 tons of food and one resource unit produces 24 tons of drinks.
Food Drinks
Foodland 20 10
Drinkland 12 24
79) Based on the above scenario, which of the following statements is true?
A) Foodland has an absolute advantage in producing food.
B) Foodland has an absolute advantage in producing drinks.
C) Drinkland has an absolute advantage in producing both food and drinks.
D) Drinkland has an absolute advantage in producing food.
80) Which of the following statements is true of the above scenario?
A) Foodland has a comparative advantage in producing drinks.
B) Drinkland cannot trade with Foodland because trade is too expensive.
C) Drinkland has an absolute advantage in producing drinks.
D) Foodland should stop producing food and just produce drinks.
81) If these two countries were to gain from trading with each other, this would support the
notion that trade is a ________.
A) zero-sum game
B) negative experience
C) positive-sum game
D) form of economic nationalism
82) A third country, Funland, also produces food and drinks. In Funland, one resource unit
produces 8 tons of food and 6 tons of drinks. Which of the following is true about Funland,
Foodland, and Drinkland?
A) Funland has a comparative advantage in producing drinks.
B) Funland has a comparative advantage in producing food.
C) Funland has an absolute advantage in producing food.
D) Funland has an absolute advantage in producing drinks.
Scenario: Better Mousetrap Inc.
Better Mousetrap Inc. is a manufacturing company that sells pest control products. Recently the
company launched an innovative mousetrap with a unique design that has been selling well in
the U.S. market. Senior Vice President Marc Wallace, even recommended expanding sales
overseas in order to increase company revenues.
83) Wallace’s executive team reviews the stages of the international product life cycle to
understand better what to expect when the product is sold overseas. Since there is virtually no
export market for the product at present, the product is most likely in which of the following
stages of the international product life cycle?
A) maturing product stage
B) new product stage
C) product decline stage
D) standardized product stage
84) Wallace expects that markets abroad will soon become fully aware of the existence of the
product and its benefits. Which of the following life cycle stages will the product be a part of
during that period?
A) maturing product stage
B) product decline stage
C) standardized product stage
D) new product stage
85) Eventually, Wallace expects that domestic production of the mousetrap will cease altogether.
This would happen in the ________ stage of the product life cycle.
A) new product
B) maturing product
C) adapted product
D) standardized product
Scenario: Conquering International Fulfillment
Jack Damon, a Boston-based entrepreneur, is determined not to make the same mistakes that
hindered his former employer’s business expansions. Jack knows that to increase his international
sales, he must make some changes in how his orders are filled.
86) Jack has always handled product returns on a case-by-case basis, but he is often unprepared
to deal with too many cases of returns. Which of the following would most likely help Jack
increase his repeat business?
A) continuing with the current system, since it is already well-established
B) accepting returns but crediting customer accounts slowly to discourage future returns
C) planning for returns and giving prompt credits to customers
D) avoiding receiving returns when possible to discourage the loss of revenue
87) In reviewing his fulfillment process, Jack realizes that different customers opt for different
types of shipping based on their preferences. Which of the following would most likely help Jack
provide better shipping service to his customers?
A) introduce overnight delivery but at a very high cost
B) reduce costs by implementing a cheaper but slower delivery method
C) implement a universal delivery method to capitalize on efficiency gains
D) offer customers a choice of delivery methods with different speeds and costs
88) Discuss the dangers of trade dependency.
89) Explain mercantilism. What were its major flaws?
90) Describe the potential benefits of international trade. Why would a nation trading with a
neomercantilist country be at a disadvantage?
91) Discuss the three essential pillars of the theory of mercantilism.
92) Explain how the theory of absolute advantage conflicts with the theory of mercantilism.
93) Explain the theory of comparative advantage using an example, and describe its assumptions
and limitations.
94) Discuss the factor proportions theory and describe the evidence on this theory.
95) Discuss the limitations of the international product life cycle theory. How well does the
theory explain current trade patterns?
96) How does the theory of comparative advantage differ from the factor proportions theory?
Include a description of the factor proportions theory in your answer.
97) Explain the factor proportions theory and discuss why it is at odds with the new trade theory.
98) Explain how both the international product life cycle theory and the new trade theory
ultimately result in lower priced goods. Include a definition of “first mover advantage” in your
answer.
99) Explain how the national competitive advantage theory supports and builds upon the factor
proportions theory.
100) Discuss the volume of international trade, and explain the role government and chance play
in the growth of international trade.