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Exam 3: The Theory of Trade and Investment

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Question 1

Multiple Choice

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__________ occurs when a firm establishes its own multinational operation,keeping information that is at the core of its competitiveness within the firm.

A) Free trade
B) Protectionist rights
C) Import substitution
D) Export substitution
E) Internalization

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

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Question 2

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The larger the firm,the lower the cost per unit. This is a principle of:

A) Gains from trade
B) Product differentiation
C) Abandoned product ranges
D) Imperfect competition
E) Economies of scale

F) B) and D)
G) A) and C)

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Question 3

Multiple Choice

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____________ is the establishment or expansion of operations of a firm in a foreign country.

Internalization occurs when a firm establishes its own multinational operation,keeping information that is at the core of its competitiveness within the firm.

The first choice in the foreign direct investment decision is whether to:

By encouraging domestic production of goods formerly imported,countries are exploiting imperfections in factor mobility.

Which determinant of national competitive advantage involves conditions in the home-nation that either hinder or aid in the firm's creation and sustaining of international competitiveness?

The overlapping product ranges described by Linder would today be called:

Adam Smith explains that industrial societies can increase output using the same labor-hours as in preindustrial society through:

____________ occurs when a firm establishes its own multinational operation,keeping information that is at the core of its competitiveness within the firm.

Gold and silver were the primary needs of feudal societies living in a state of autarky.

________ is the political and economic policy of the 17th and early 18th centuries aimed at increasing a nation's wealth and power by encouraging the export of goods in return for gold.

Describe the stages of the product cycle.

At a large zipper factory in China,there is an assembly line of workers. One worker prepares the metal for melting,another sets the molds,a third pours the metal,a forth takes it to the curer,a fifth does quality control,and a sixth packages the zippers for shipment. Through this process,the factory can make thousands of zippers per day. This procedure is best described as:

Firms interested in acquiring access to linseed oil from Indonesia are seeking:

Examples of ___________ considerations in the strategic trade theory include the willingness to subsidize workers' education or protecting the industry from foreign competition.

According to the theory of foreign direct investment,firms that expand across borders may be seeking all of the following EXCEPT:

___________ refers to self sufficiency during feudal times.

During the age of Mercantilism,governments identified strength with the accumulation of specie,or gold and silver.

Even if one country was most efficient in the production of two products,it must be relatively more efficient in the production of one good. It should then specialize in the production and export of that good in exchange for the importation of the other goods. This describes the: