Chapter 2

Question 1

How is comparative advantage archived

Answer 1

Sustained period of investment
Lower labor cost
Proximity to raw materials
Subsidies to help native or local industries
Building expertise in certain key areas

Question 2

The Competitive Advantage of Nations can also be achieved through

Answer 2

Factor conditions
Demand conditions
Related and supporting industries
Firm strategy, structure, and rivalry

Question 3

Product life cycle theory

Answer 3

manufacture for home market and begin exporting
foreign production starts
foreign products become increasingly competitive
import back to home market

Question 4

what are Types of tariffs

Answer 4

Specific: charges are imposed on particular products either by weight or volume

Ad valorem: a straight percentage of the import price (20% on price)

Discriminatory: the tariffs are charged against goods coming from a particular country.

Question 5

What are the Non –tariffs barriers

Answer 5

Quantitative restrictions: trade barriers that impose a numerical limit on the amount / quantity of goods that may be imported or exported

Restrictive practices: government laws, regulations, policies or procedures that restrict international trade.

Question 6

what are the Levels of Economic Cooperation

Answer 6

Free Trade Area - Elimination of internal duties/ tariffs among member countries

Customs Union -Free trade area + establishment of common barriers (policy) among non members

Common Market - Customs union + removal of restrictions on movement of production factors among members

Economic and Monetary Union -Common market, Harmonization of national ,economic policies, One money

Political Union -Harmonization of national political policies

Question 7

World Trade Organization

Answer 7

1. It sets many rules governing trade between its 132 members
2. WTO provides a panel of experts to hear and rule on trade disputes between members, and, unlike GATT, issues binding decisions

Question 8

The International Monetary Fund

Answer 8

1. IMF was created to assist nations in becoming and remaining economically viable
2. It assists countries that seek capital for economic development and restructuring
3. IMF loans come with stipulations that borrowing countries slash spending and impose controls to curb inflation
4. It helps maintain stability in the world financial markets

Question 9

Objectives of the IMF include

Answer 9

1. stabilization of foreign exchange rates
2. establish convertible currencies to facilitate international trade
3. lend money to members in financial trouble

Question 10

World Bank Group (WBG)

Answer 10

The goal of WBG is to reduce poverty and the improvement of living standards by promoting sustainable growth and investment in people.

Question 11

The functions of the WBG include:

Answer 11

1. lending money to countries to finance development projects in education, health, and infrastructure;
2. providing assistance for projects to the poorest developing countries;
3. lending directly to the private sector in developing countries with long-term loans, equity investments, and other financial assistance;
4. provide investors with investment guarantees against “noncommercial risk,” so developing countries will attract FDI; and
5. provide conciliation and arbitration of disputes between governments and foreign investors

Question 12

Non-tariff barriers

Answer 12

 Quotas
 Embargoes
 voluntary export restrain(VER)

Question 13

Market entry Barriers

Answer 13

 Product and testing standard
 Restricted accesses to distribution
 Local purchase agreement
 Regulatory controls
 Currency control
 Investment control