University of Colorado, Boulder

INBU 3300

Chapter 5

1)Why should managers in international business understand international trade theories?

1. 1. 1. Countries' trade policies, based on trade theories, influence which products companies might export to given countries.
      2. The understanding helps managers decide whether their companies should follow laissez-­?faire management practices.
      3. The theories help managers decide whether to use large-­?scale versus small-­?scale technologies for serving their export markets.
      4. The comprehension is useful when deciding whether to transfer managers abroad to manage foreign operations.

1. 2. The trade theory that says a country should export more than it imports is known as                               .
      1. mercantilism
      2. absolute advantage
      3. comparative advantage
      4. import substitution

1. 3. Which of the following undesirable results will most likely occur for a country running a favorable balance of trade?
      1. higher unemployment
      2. higher domestic interest rates
      3. fewer funds to invest abroad
      4. granting credit that may be risky

1. 4. As a leading exporter of luxury automobiles, Germany has built a strong reputation in engineering. Germany's trade most likely relies on a(n)                                                                                        .
      1. outward immigration restriction
      2. natural advantage
      3. acquired advantage

1. 1. 4. neomercantilist policy

1. 5. Assume the following conditions: In the United States it takes 5 units of resources to produce a ton of potatoes and 10 to produce a ton of coal. In Canada it takes 6 units of resources to produce a ton of potatoes and 9 to produce a ton of coal. According to the theory of absolute advantage, .
      1. the United States should export potatoes to Canada and import coal from Canada
      2. the United States should export coal to Canada and import potatoes from Canada
      3. the United States should import both potatoes and coal from Canada, while concentrating on production of more valuable goods
      4. there would be no basis for trade

1. 6. Which of the following assumptions was made in the original theories of absolute and comparative advantage?
      1. Specialized labor seeks efficiency.
      2. Labor resources are fully employed.
      3. Countries pursue objectives other than economic efficiency.
      4. Production networks enable countries to concentrate on particular functions.

1. 7. Countries with varied climates and varied natural resources generally                                   

than countries with less varied climates and natural resources.

1. 1. 1. have lower per capita incomes
      2. depend less heavily on trade
      3. have more ethnic subgroups
      4. have higher endowments of capital relative to labor

1. 8. The most internationally mobile factor of production is                                .
      1. labor
      2. management
      3. long-­?term capital
      4. short-­?term capital

1. 9. Brain drain is a term that describes                           .
      1. a country's loss of educated, productive people
      2. a nation's shift from an emerging market to a developed economy
      3. the exportation of high-­?technology products in exchange for low-­?technology products
      4. the unauthorized use of patents, copyrights, and technology by the counterfeiting industry