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Chapter 6- International Trade Theory
Terms in this set (27)
Manatee Mfg. is able to source parts for its refrigeration products from anywhere in the world because the United States does not place any quotas or limitations on the imports they need. This is a reflection of a _____ policy.
Based on the theories of Smith, Ricardo, and Heckscher-Ohlin, in a country with access to cheap labor, productive land, and diverse plant life, it makes sense to _____ agricultural goods.
New trade theory states that some countries specialize in the production and export of a particular product because
in certain industries the world can only support a limited number of firms.
The trade theories associated with Smith and Ricardo advocate for _____ free trade.
When a government intervenes to achieve a surplus in the nation's balance of trade, this action is consistent with the main tenet of ______.
______ is reflected in a nation in which the government does not attempt to influence what its citizens can buy from another country by applying import duties or what citizens can produce and sell to another country.
Reflecting the theories of Smith, Ricardo, and Heckscher-Ohlin, free trade permits ______, which allows a country to manufacture and export in those areas where they have a comparative advantage.
Because of economies of scale, some countries specialize in manufacturing a particular product (such as cars) for which the global market can only support a limited number of firms. This is a reflection of _____.
new trade theory
Which theory does NOT support unrestricted free trade between countries?
______ is the first theory of trade that advocated that a country should export more than it imports and should accumulate gold and silver to make up the difference and maintain a trade surplus.
A country is said to have an absolute advantage in the production of an item when the country
is more efficient than any other country at producing the item.
Portugal can produce wine and cloth with less labor than England. But, given all factors of production, England can produce cloth relatively better than Portugal. According to Ricardo's theory of comparative advantage, it makes sense for England to
export cloth and import wine from Portugal.
When a country is more efficient at producing a product than any other country, the country has a(n) ______ advantage in the production of that product.
Ricardo's theory of _____ advantage states that it makes sense for a country to specialize in the production of those goods that it produces most efficiently and then purchase the goods that it produces less efficiently from other countries, even if this means buying goods from other countries that it could produce more efficiently itself.
Ricardo's theory encourages ______ because it suggests that trade is a positive-sum game where all participating countries realize economic gains.
A criticism of Ricardo's theory of comparative advantage is that it is a simple model that includes many
What assumption does the Ricardian model of comparative advantage make in terms of converting resources?
It assumes that all resources can easily shift from one thing to another.
When discussing constant returns to specialization, it is realistic to assume that the units of resources required to produce one unit will _____ no matter where a country is on the production possibilities frontier.
remain the same
A basic message of Ricardo's theory of comparative advantage is that:
potential world production is greater with unrestricted free trade than it is with restricted trade.
even if countries lack an absolute advantage in the production of any good, consumers can still consume more if there are no restrictions on trade.
Ricardo's theory of comparative advantage assumes ______ returns to scale.
It takes 12 units of resources to produce 100 pounds of silk. It takes 13 units to produce 115 pounds of silk and 15 units to produce 120 pounds of silk. This is an example of ______ returns to specialization.
True or false: The benefits from free trade are not evenly distributed throughout an economy.
Which form of returns to specialization means that the units of resources required to produce one unit are assumed to remain the same no matter where a country is on the production possibilities frontier?
Country A wants to produce more rice. Unfortunately, it will have to farm less productive land to produce this rice. This fact represents the idea of ______ returns to specialization.
In the real world, it costs money to move products from one country to another, but Ricardo's model does not address these ______ costs.
What concept negates the idea that a country can specialize to the degree suggested by the Ricardian model?
Which type of returns to specialization happen when additional units of resources are required to produce each additional unit?
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