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OSC 475 Exam 1 Review Questions_Summer2010-1

OSC 475 Exam 1 Review Questions_Summer2010-1 -...

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OSC 475 Exam 1 Review Questions Essay Questions Chapter  1: 1. Please briefly explain three theories: Ricardo’s theory of comparative advantage,  Heckscher-Ohlin Factor endowment theory, and Porter’s cluster theory, and give  an example of each theory. (Page 10-12). Ricardo’s theory of comparative advantage: one country trades with another  country when it can produce certain goods that are more efficient than the other. Heckscher- Ohlin Factor endowment theory: a country will have more advantage  when they naturally endow in capital, land, enterprise, and education Porter’s cluster theory: the company will be more advantage to stay in one area  that all companies are in the same industry. Eg: silicon valley in CA for software  and computer companies. Switzerland for making watch.   Chapter 7: 2. Draw the map of 10 steps Letter of Credit and explain each of them (page 128 to  page 132) 1 Importer’s  bank Exporter’s  bank Step 1: importer and exporter negotiate about the  deal. Step 2: the importer send to the importer’s bank  to request a L/C for their behalf, name the  exporter as beneficiary Step 3:the importer’s bank send the L/C to  exporter’s  Step4 : advising bank send the L/C to exporter Step5:exporter send the merchandise to  importer, after all the document collected, the  exporter send the documents to the advising  bank Step6:the advising bank check the document  against in term of L/C n send all these to issuing  bank Step 7: issuing bank receive and check the 
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1 3. Please explain two advantages of Trade Card over  Letters of Credits (page 140) Chapter 8: 4. There are three types of hedges that a firm can use to protect itself against  transaction exposure. Describe each method. (P168-170) Forward Market Hedge: Money Market Hedge: Option market hedge: Multiple Choice Questions 2 Exporter Importer
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Chapter 1 1. The total value of international trade in services and merchandise is about: a. $ 9 billion. d. $ 9 thousand. b. $ 9 trillion. e. None of the above c. $ 9 million. The total value of international trade was $ 9 trillion in 2004. That figure should/could be  changed in the answers for 2007 to $ 10 trillion and starting in 2010 to $ 11 trillion (or so). DIF: Moderate REF: 1-1
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