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Exam 6: International Trade Theory

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Question 51

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Which of the following balance-of-payment accounts records one-time changes in the stock of assets?

A) Capital account
B) Current account
C) Financial account
D) Monetary account

E) A) and B)
F) A) and C)

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Question 52

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Mercantilism supports the idea that countries should export more than what they import.

A) True
B) False

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Question 53

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According to Ricardo's theory of comparative advantage,countries shall not produce a good even if they have an absolute advantage in its production.

How does the Heckscher-Ohlin theory explain international trade?

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 _____.

What will happen,according to Paul Samuelson's critique,if a rich country enters into a free trade agreement with a poor country?

Economies of scale are unit cost reductions associated with a large scale of output.

Which of the following factors,according to Porter's national Diamond,is most likely to give a country competitive advantage over another country?

What are first-mover advantages?

A capital intensive country exports products that are capital intensive.This is an example of Leontief Paradox.

Some of the arguments made by the product life-cycle theory seems ethnocentric and increasingly dated when viewed from an Asian or European perspective.

Identify a major flaw associated with mercantilism.

Heckscher-Ohlin theory stresses that comparative advantage arises from differences in productivity.

A country has an absolute advantage in the production of a product when it is more efficient than any other country in producing it.

What is the main principle of mercantilism?

Heckscher-Ohlin theory supports the case for unrestricted free trade between nations.

Diminishing returns show that it is feasible for a country to specialize to the degree suggested by the simple Ricardian model.

Which of the following is a major limitation of the simple Ricardian model of comparative advantage?

Explain Smith's theory of absolute advantage.