Testbank 1-1 Chapter 01-04 Chapter 1: Introduction TRUE/FALSE TRUE/FALSE 1.The Bretton Woods Conference triggered the creation of the World Trade Organization in 1944. 2.The Treaty of Rome in 1957 was the first step in the creation of the European Union. 3.The North American Free Trade Association (NAFTA) includes only the United States and Canada. 4.The Maastricht Treaty created the common currency of the European Union. 5.In 2012, the United States exported more goods than any other country in the world. 6.The top fifteen largest exporters represent more than half of all exports in the world. 7.The “Wal-Mart effect” pushes manufacturers to sell products at ever-lower prices, often obtained by manufacturing abroad. 8.The term “outsourcing” refers to a strategy whereby a company purchases plants overseas. 9.The term “re-shoring” refers to a strategy whereby a company brings back to the United States production that had been outsourced abroad. 10.The United States produces more automobiles than any other country in the world. 11.According to Adam Smith, countries trade when they enjoy a comparative advantage over other countries in the production of a given product. 12.A country enjoys an absolute advantage in the production of a particular good when it can produce it at a lower price than another country. 13.Most trade today is more likely to be explained by the Theory of Comparative Advantage than by the Theory of Absolute Advantage. 14.A country often enjoys a comparative advantage because of the abundance of a particular production factor (land, labor, capital, or entrepreneurship) within its borders. 15.Michael Porter views Silicon Valley is an example of a “cluster” of innovation and manufacturing.