Globalbusiness CH5

Question 1

free trade

Answer 1

government is not involved in any way

Question 2

international trade allows a country to…

Answer 2

specialize in manufacturing and exports and products and services that they can produce efficiently, leads to importing other products and services that another country can produce more efficiently

Question 3

mercantilist

Answer 3

government involvement in promoting exports and limiting imports

Question 4

who promotes unrestricted trade

Answer 4

Smith, Ricardo and Hecksher- Ohlin

Question 5

new trade theory

Answer 5

is Porters theory, limited and selective government intervention

Question 6

trade surplus is? and is also known as…?

Answer 6

exports > imports, zero sum game because it results in a gain by one country and a lose in another

Question 7

Smiths theory of Absolute advantage

Answer 7

country has absolute advantage in the production of a product when it is more efficient than any other country therefore countries should specialize in production to create a positive sum game.

Question 8

Ricardos theory of Competitive Advantage

Answer 8

countries should specialize in the production of those goods and services they produce more efficiently and buy goods that they produce lass efficiently from other countries. Competitive advantage provides a strong rational for encouraging free trade

Question 9

immobile resources

Answer 9

resources that do not always move from one economic activity to another

Question 10

diminishing returns

Answer 10

more units of resources are required to produce each additional unit

Question 11

dynamic effect and economic growth

Answer 11

opening a country to trade could increase a countries stock of resources as increased supplies and become available from abroad

Question 12

efficiency of resource utilization

Answer 12

free up resources from other users

Question 13

how could a country be worse off with free trade

Answer 13

ability to outsource service jobs that were traditionally not internationally mobile may have the same effect of a mass migration into the US where wages would then fall

Question 14

4 theories of International Trade

Answer 14

1. Hecksher - Ohlin theory
2. Product life cycle theory
3. new trade theory
4. national competitive advantage: Porters Diamond

Question 15

HeckScher-Ohlin theory

Answer 15

Comparative advantage arises from differences in national factor endowment. predicts that countries will; export goods that make intensive use fo locally abundant factors. Import goods that make intensive use of factors that are locally scarce

Question 16

Wassily Leontief theory

what were results of this at variance with

Answer 16

since the US was relatively abundant in capital compared to other nations the US would be a exporter of capital intensive goods and an importer of labour intensive goods.
at variance with predictions of the trade theory it became known as Leonteif paradox

Question 17

product life cycle theory

Answer 17

products mature both the location of sales and the optimal production location will move to other countries affectively the flow of direction of trade

Question 18

phases of new product life cycle

Answer 18

1. New product phase
2. maturing phase
3. standardized product phase

Question 19

New trade theory is also known as?

Answer 19

Economies of scale

Question 20

what is first mover advantage?

Answer 20

Economic strategic advantages that occur to early entrants in the industry

Question 21

Implications of new trade theory for nations?

what should new governments do?

Answer 21

nations may benefit from trade even when they have the same resource endowments or tech (at variance with Heckscher - Ohlin Theory). government should consider strategic trade policies that nurture and protect firms and industries where first mover advantages and economies of scale are important

Question 22

Micheal porters determinants of national competitive advantage

Answer 22

4 attributes of of a nation to promote or impede the creation of competitive advantage

1. factor endowments
2. firm strategy structure and rivalry
3. related and supplying industries
4. demand conditions

Question 23

what are factor endowments

Answer 23

a nations position in factors of production necessary to compete in a given industry (natural resources, climate change)

Question 24

what are demand conditions?

Answer 24

nature of the home demand for the industry product or service influences the development of capabilities

Question 25

what is related and supporting industries?

Answer 25

presents of supplier industries and related industries that are internationally competitive

Question 26

what are a firms strategy, structure and rivalry

Answer 26

nature of domestic rivalry. how companies should be created, structured and managed

Question 27

implication of trade theory for managers

Answer 27

location, first mover advantage, policies