Student name:__________1)Which of the following is a flaw associated with mercantilism?A) Mercantilists do not support government intervention in trade.B) Mercantilists view trade as a zero-sum game.C) Mercantilists recommend policies to maximize imports.D) Mercantilists recommend countries maintain a negative trade balance.2)The commercial aircraft industry can support only a limited number of firms, largelybecause the existence of established firms would make it difficult to be competitive. This is a basic tenet of3)_____ argued that countries should specialize in the production of goods for which they have an absolute advantage.4)Walmart makes bulk purchases from its vendors and hence it is able to get better deals than its competitors. This allows Walmart to offer greater discounts to its customers. In this case, Walmart benefits fromVersion 11
5)A country has an absolute advantage in the production of a product when it is more efficient than any other country in producing it.⊚true⊚false6)Country A exports electronic goods from Country B although there are no underlyingdifferences in factor endowments between the two countries. Which of the following theo-ries explains this anomaly?A) comparative advantage theoryB) new trade theoryC) Ricardo’s theoryD) Smith’s theory7)Factor endowments refer to the extent to which a countryVersion 12
8)Identify a major disadvantage of the product life-cycle theory.9)The theories of Smith and Ricardo show that a country should engage in interna-tional trade, even for products that it is able to produce for itself.⊚true⊚false10)A country’s balance-of-payments accounts keep track of thesesses.11)Country A can produce product X, but it can also buy it at a cheap rate from Country B. Which of the following courses of action is suitable in this situation according to Adam Smith’s theory of absolute advantage?Version 13
A) Country A should import product X from Country B and it should not attempt to produce it at home.B) Country A should partly import the product and produce it domestically.
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- Spring '16
- International Trade