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International Trade Theory and Global Economic Relationships Quiz

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Which of the following theories suggests that countries should specialize in producing goods in which they have a comparative advantage?

Comparative advantage theory

Explanation

Specialize in goods with relative efficiency.

Which economist introduced the theory of absolute advantage?

Adam Smith

Explanation

Adam Smith introduced absolute advantage.

Which international organization is responsible for setting the rules of trade between nations and resolving trade disputes?

World Trade Organization

Explanation

Responsible for global trade rules.

Which economic concept describes the situation where a country can produce a good at a lower opportunity cost than another country?

Comparative advantage

Explanation

Produce with lower opportunity cost.

According to the theory of comparative advantage, what should countries do to maximize overall welfare?

Produce goods for which they have a comparative advantage

Explanation

Maximize welfare via specialized production.

Which trade theory suggests that countries should produce and export goods that utilize abundant factors of production?

Factor proportions theory

Explanation

Export goods with abundant factors.

Which trade theory suggests that countries will export goods that make intensive use of the factors of production they have in abundance?

Factor proportions theory

Explanation

Export goods utilizing abundant factors.

What is the Heckscher-Ohlin model primarily concerned with?

Differences in factor endowments between nations

Explanation

Focuses on factor endowment disparities.

What is the main principle behind the theory of strategic trade policy?

Governments should implement policies to manipulate trade patterns to their advantage

Explanation

Governments alter trade for advantage.

#10

Which trade theory suggests that countries may benefit from trade even if they do not have an absolute or comparative advantage in any industry?

Strategic trade theory

Explanation

Nations benefit despite lack of advantage.

#11

Which trade theory emphasizes the role of economies of scale in determining trade patterns?

New trade theory

Explanation

Focuses on economies of scale.

#12

Which international trade theory suggests that the pattern of trade is determined by differences in technology between nations?

Product life cycle theory

Explanation

Trade patterns linked to technology disparities.

#13

In the context of international trade, what does 'dumping' refer to?

Selling goods in foreign markets at a price below cost

Explanation

Selling below cost in foreign markets.

#14

What is the primary focus of the Porter's Diamond model?

Firm strategy, structure, and rivalry

Explanation

Focuses on firm dynamics.

#15

What is the main criticism of the theory of comparative advantage?

It assumes constant opportunity costs

Explanation

Assumes static opportunity costs.

#16

What is the main criticism of the strategic trade policy?

It may lead to inefficient allocation of resources

Explanation

Potential resource misallocation.

#17

What is the main criticism of the factor proportions theory?

It assumes perfect mobility of factors of production

Explanation

Assumes flawless factor mobility.

International Trade Theory and Global Economic Relationships Quiz

Which of the following theories suggests that countries should specialize in producing goods in which they have a comparative advantage?

Which economist introduced the theory of absolute advantage?

Which international organization is responsible for setting the rules of trade between nations and resolving trade disputes?

Which economic concept describes the situation where a country can produce a good at a lower opportunity cost than another country?

According to the theory of comparative advantage, what should countries do to maximize overall welfare?

Which trade theory suggests that countries should produce and export goods that utilize abundant factors of production?

Which trade theory suggests that countries will export goods that make intensive use of the factors of production they have in abundance?

What is the Heckscher-Ohlin model primarily concerned with?

What is the main principle behind the theory of strategic trade policy?

Which trade theory suggests that countries may benefit from trade even if they do not have an absolute or comparative advantage in any industry?

Which trade theory emphasizes the role of economies of scale in determining trade patterns?

Which international trade theory suggests that the pattern of trade is determined by differences in technology between nations?

In the context of international trade, what does 'dumping' refer to?

What is the primary focus of the Porter's Diamond model?

What is the main criticism of the theory of comparative advantage?

What is the main criticism of the strategic trade policy?

What is the main criticism of the factor proportions theory?

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