Quiz 1 Chapters 4-5

Question 1

What is merchantilism

Answer 1

-government involvement and policies that promote exports and limit imports
- utopic on paper but truly a zero sum gam

Question 2

what is absolute advantage

Answer 2

-a country is more efficient and producing a product than any other country that produces it: Colombia and cocaine
-COINED BY ADAM SMITH

Question 3

What is ADAM SMITHS’ opinion of what to do with absolute advantage

Answer 3

-SPECIALIZE IN THE GOODS THEY HAVE ABS-AVD OF FOR,
- TRADE FOR THE GOODS THEY HAVE A HARD TIME PRODUCING
-free trade enthusiasts

Question 4

What is Comparative advantage

Answer 4

-COINED BY DAVID RICARDO
- COUNTRIES SHOULD SPECIALIZE IN THE PRODUCTION OF GOODS AND SERVICES THEY CAN
-Free trade enthusiast

Question 5

what was HECKSHER-OHLINS trade idea

Answer 5

• In favour of international trade
• free market, unrestricted
  COUNTRIES WILL EXPORT THOSE GOODS THAT MAKE INTENSIVE SE OF FACTORS THAT ARE LOCALLY ABUNDANT, WHILE IMPORTING GOODS THAT MAKE INTENSIVE USE OF FACTORS THAT ARE LOCALLY SCARCE
• you can never have everything

Question 6

What are some arguments for and against FREE TRADE

Answer 6

AGAINST
Protecting jobs and industries
National security
Retaliation
Protecting consumers
Furthering foreign policy objectives
Protecting human rights

FOR
The gains of trade arise because international trade allows a country to specialize in the manufacture and export of products that can be produced most efficiently in that country, while importing products that can be produced more efficiently in other countries.

• it makes sense to import scarce resources
• can create more affordable products for host countries through outsourcing labour (if ur cool with that)

Question 7

what is NEW TRADE THEORY

Answer 7

• World can only support a limited amount of firms
• the weak shall perish
  -economies of scale
• increase product variety, reducing costs
• AGRUES THAT PRODUCT EFFICIENCY MAY NOT BE A RESOURCE ADVANTAGE WITHIN A COUNTRY, RATHER THE ABILITY TO BE THE FIRST MOVER IN AND OUT OF THAT COUNTRY

Question 8

what is NATIONAL COMPETITIVE ADVANTAGE?
what are its determinants

Answer 8

-COINED BY MICHAEL PORTER
-Explains why particular nations achieve international success in particular industries
-highlights the importance of national rivalry and specialisation

• Demand conditions
• Relating and supporting industries
• Factor endowments
• Firm strategy, structure, and rivalry

Question 9

What are location implications?

Answer 9

when a firm disperses its productive activities to those countries where, according to the theory of international trade, they can be performed most efficiently.

Question 10

What are the implications of first mover advantages

Answer 10

-production of a particular new product that may subsequently dominate global trade in that product
-the ROI of investing substantial financial resources in trying to build a first mover, or early mover , advantage, is worth losing

Question 11

What are the implications of Policy?

Answer 11

-theories of international trade matter to international businesses bc firms are major players in that scene.
-businesses can influence government trade policies and can lobby to promote free trade or trade restrictions.

Question 12

what are the policy instruments of trade? (9)

Answer 12

-TARIFFS
-SUBSIDIES
-IMPORT QUOTAS
-VOLUNTARY EXPORT RESTRAINTS (VER)
-EXPORT TARRIFS
-EXPORT BANS
-LOCAL CONTENT REQUIREMENTS
-ADMINISTRATIVE POLICIES
-ANTI DUMPING POLICIES

LEAVE STAI

Question 13

What are TARIFFS?

Answer 13

• AD VALOREM; levied as a proportion of the value of imported goods ; if taxes go up so do gas prices
• SPECIFIC TARIFFS; levied as a fixed charge

Question 14

What are SUBSIDIES

Answer 14

GOVERNMENT PAYS DOMESTIC PRODUCER VIA; tax brakes, cash grants, low interest loans, etc

Question 15

What are IMPORT QUOTAS

Answer 15

Direct restriction of the quantity of a certain good IMPORTED from another country

Question 16

WHAT ARE VOLUNTARY EXPORT RESTRAINTS

Answer 16

Direct restriction of the quantity of a certain good being EXPORTED to another country

Question 17

What are EXPORT TARRIFS

Answer 17

-Tax placed on an export of a good
-Discriminate against exporting to ensure there is an abundance of that resource in our country

Question 18

What are EXPORT BANS

Answer 18

• A policy that partially or entirely restricts the export of a good.
• Pro consumer, better prices for consumers

Question 19

WHAT ARE LOCAL CONTENT REQUIREMENTS

Answer 19

-Requirement can be expressed either in physical terms or value terms
- 75% of components must be produced locally OR 75% of the value of this product must be produced locally.

Question 20

What are ADMINISTRATIVE POLICIES

Answer 20

-Things that the government does to make it difficult to conduct or move you business in your country/province
-Designed to inhibit free trade

Question 21

What are ANTI-DUMPING POLICIES

Answer 21

-Selling goods in a foreign market at a lower price than their cost of production in host country
-Normally for shitty or defected products that cant sell in host country

Question 22

what arguments can be made for political and economic government intervention in trade?

Answer 22

Political:
- Would it be better to train our population in better jobs instead tho
- Outsource the production of one good in order to train manufacturers in a better paying job that supports the economy more.

Economic:
- Boosting overall wealth for both people and businesses

Question 23

What implications do Policies have for businesses (Trade barriers, firm strategy, and policies)

Answer 23

-TRADE BARRIERS AND FIRM STRATEGY
- Raise cost of exporting products to a country
- VERs may limit a firms ability to serve a country from location outside that country
- Local content requirements

POLICIES
- international companies will hire lobbyists
- governmental protection can backfire, and other governments can retaliate
- production activities in optimal locations around the world