Questions on International Trade

Topics: International trade, Free trade, World Trade Organization Pages: 10 (2933 words) Published: May 15, 2013
Testbank

Chapter 1: Introduction

TRUE/FALSE 1. Many of the developing countries of the world experience traffic gridlock. ANS: T DIF: Easy REF: Introduction

2. World trade has grown about 10 percent per year since 1950. ANS: F DIF: Easy REF: 1-1

3. World trade in services representf a higher percentage of total world trade than does world trade in merchandise. ANS: F DIF: Moderate REF: 1-1: Tables 1-1, 1-2, and 1-3

4. The Bretton Woods Conference triggered the creation of the World Trade Organization in 1944. ANS: F DIF: Moderate REF: 1-2a

5. The Treaty of Rome in 1957 was the first step in the creation of the European Union. ANS: T DIF: Easy REF: 1-2c

6. The North American Free Trade Association (NAFTA) includes only the United States and Canada. ANS: F DIF: Moderate REF: 1-2c: Table 1-4

7. The euro has replaced the currencies of all of the countries of the European Union. ANS: F DIF: Hard REF: Table 1-2d

8. In 2007, the United States exported more goods than any other country in the world. ANS: F DIF: Moderate REF: 1-3: Figure 1-3

9. In 2007, the United States imported about 1.5 times more goods than it exported. ANS: T DIF: Hard REF: 1-3: Figures 1-3 and 1-4

10. A company that has to make large capital outlays before starting production will want to export in order to spread its costs over a large number of units produced. ANS: T DIF: Moderate REF: 1-4a

1-1

Chapter 1: Introduction 11. The “Wal-Mart effect” pushes manufacturers to sell products at ever-lower prices, often obtained by manufacturing abroad. ANS: T DIF: Moderate REF: 1-4a

12. The term “outsourcing” refers to a strategy whereby a company purchases plants overseas. ANS: F DIF: Moderate REF: 1-4a

13. A competitor offering a new product in a mature market can entice a company to start importing its own low-cost alternative. ANS: T DIF: Moderate REF: 1-4b

14 Consumers are becoming increasingly worldly and willing to purchase foreign-made products. ANS: T DIF: Easy REF: 1-4c

15. According to Thomas Friedman, individuals looking for jobs now compete with hundreds of other similarly trained applicants, coming from all corners of the world. ANS: T DIF: Hard REF: 1-4d

16. According to Adam Smith, countries trade when they enjoy a comparative advantage over other countries in the production of a given product. ANS: F DIF: Easy REF: 1-5a

17. A country enjoys an absolute advantage in the production of a particular good when it can produce it at a lower price than another country. ANS: T DIF: Easy REF: 1-5a

18. David Ricardo’s Theory of Comparative Advantage explains why countries that enjoy an absolute advantage in making certain goods can still prefer to purchase these products from other countries. ANS: T DIF: Hard REF: 1-5b

19. Most trade today is more likely to be explained by the Theory of Comparative Advantage than by the Theory of Absolute Advantage. ANS: T DIF: Moderate REF: 1-5b

20. A country often enjoys a comparative advantage because of the abundance of a particular production factor (land, labor, capital, or entrepreneurship) within its borders. ANS: T DIF: Easy REF: 1-5c

1-2

Testbank 21. The Factor Endowment Theory was developed by Raymond Vernon. ANS: F DIF: Easy REF: 1-5c

22. The International Product Life Cycle Theory explains why there are no televisions manufactured in Great Britain and the United States, although that technology was invented in those countries. ANS: T DIF: Easy REF: 1-5d

23. A product is invented in Country X and is first manufactured there. The International Product Life Cycle Theory holds that the product will be manufactured in developing countries within a couple of years. ANS: F DIF: Hard REF: 1-5d

24. Michael Porter views Silicon Valley is an example of a “cluster” of innovation and manufacturing. ANS: T DIF: Easy REF: 1-5e

25. Until the 1950s, most of the area rugs in the world were manufactured in Persia (Iran) and Pakistan. Artisans in these...
Continue Reading

Please join StudyMode to read the full document

You May Also Find These Documents Helpful

  • Questions: International Trade Theory Essay
  • Tariffs: International Trade and Tariff Essay
  • international trade Essay
  • International Trade Essay
  • International Trade Essay
  • International Trade Test Questions Essay
  • Important Question for an International Trade Essay
  • International Trade Essay

Become a StudyMode Member

Sign Up - It's Free