WGU C211 OA EXAM 2 2025/2026 QUESTIONS WITH
ANSWERS GUARANTEE A+
✔✔Infant industry argument - ✔✔The argument that if domestic firms are as young as
"infants," in the absence of government intervention, they stand no chances of surviving
and will be crushed by mature foreign rivals.
✔✔Local content requirement - ✔✔A requirement stipulating that a certain proportion of
the value of the goods made in one country must originate from that country.
✔✔Merchandise - ✔✔Tangible products being traded.
✔✔Modern trade theories - ✔✔The major theories of international trade that were
advanced in the 20th century, which consist of (1) product life cycle, (2) strategic trade,
and (3) national competitive advantage of industries.
✔✔Nontariff barrier (NTB) - ✔✔Trade barrier that relies on nontariff means to
discourage imports.
✔✔Opportunity cost - ✔✔Cost of pursuing one activity at the expense of another
activity, given the alternatives (other opportunities).
✔✔Product life cycle theory - ✔✔A theory that accounts for changes in the patterns of
trade over time by focusing on product life cycles.
✔✔Protectionism - ✔✔The idea that governments should actively protect domestic
industries from imports and vigorously promote exports.
✔✔Resource mobility - ✔✔Assumption that a resource used in producing a product for
one industry can be shifted and put to use in another industry.
✔✔Services - ✔✔Intangible services being traded.
✔✔Strategic trade policy - ✔✔Government policy that provides companies a strategic
advantage in international trade through subsidies and other supports.
✔✔Strategic trade theory - ✔✔A theory that suggests that strategic intervention by
governments in certain industries can enhance their odds for international success.
✔✔Subsidy - ✔✔Government payment to domestic firms.
✔✔Tariff barrier - ✔✔Trade barrier that relies on tariffs to discourage imports.
, ✔✔Theory of absolute advantage - ✔✔A theory that suggests that under free trade, a
nation gains by specializing in economic activities in which it has an absolute
advantage.
✔✔Theory of comparative advantage - ✔✔A theory that focuses on the relative (not
absolute) advantage in one economic activity that one nation enjoys in comparison with
other nations.
✔✔Theory of mercantilism - ✔✔A theory that suggests that the wealth of the world is
fixed and that a nation that exports more and imports less will be richer.
✔✔Theory of national competitive advantage of industries (diamond theory) - ✔✔A
theory that suggests that the competitive advantage of certain industries in different
nations depends on four aspects that form a "diamond."
✔✔Trade deficit - ✔✔An economic condition in which a nation imports more than it
exports.
✔✔Trade embargo - ✔✔Politically motivated trade sanctions against foreign countries
to signal displeasure.
✔✔Trade surplus - ✔✔An economic condition in which a nation exports more than it
imports.
✔✔Voluntary export restraint (VER) - ✔✔An international agreement that shows that
exporting countries voluntarily agree to restrict their exports.
✔✔Agglomeration - ✔✔Clustering of economic activities in certain locations.
✔✔Bargaining power - ✔✔Ability to extract favorable outcome from negotiations due to
one party's strengths.
✔✔Demonstration (contagion or imitation) effect - ✔✔The reaction of local firms to rise
to the challenge demonstrated by MNEs through learning and imitation.
✔✔Dissemination risk - ✔✔The risk associated with unauthorized diffusion of firm-
specific know-how.
✔✔Downstream vertical FDI - ✔✔A type of vertical FDI in which a firm engages in a
downstream stage of the value chain in a host country.
✔✔Expropriation - ✔✔Government's confiscation of foreign assets.
ANSWERS GUARANTEE A+
✔✔Infant industry argument - ✔✔The argument that if domestic firms are as young as
"infants," in the absence of government intervention, they stand no chances of surviving
and will be crushed by mature foreign rivals.
✔✔Local content requirement - ✔✔A requirement stipulating that a certain proportion of
the value of the goods made in one country must originate from that country.
✔✔Merchandise - ✔✔Tangible products being traded.
✔✔Modern trade theories - ✔✔The major theories of international trade that were
advanced in the 20th century, which consist of (1) product life cycle, (2) strategic trade,
and (3) national competitive advantage of industries.
✔✔Nontariff barrier (NTB) - ✔✔Trade barrier that relies on nontariff means to
discourage imports.
✔✔Opportunity cost - ✔✔Cost of pursuing one activity at the expense of another
activity, given the alternatives (other opportunities).
✔✔Product life cycle theory - ✔✔A theory that accounts for changes in the patterns of
trade over time by focusing on product life cycles.
✔✔Protectionism - ✔✔The idea that governments should actively protect domestic
industries from imports and vigorously promote exports.
✔✔Resource mobility - ✔✔Assumption that a resource used in producing a product for
one industry can be shifted and put to use in another industry.
✔✔Services - ✔✔Intangible services being traded.
✔✔Strategic trade policy - ✔✔Government policy that provides companies a strategic
advantage in international trade through subsidies and other supports.
✔✔Strategic trade theory - ✔✔A theory that suggests that strategic intervention by
governments in certain industries can enhance their odds for international success.
✔✔Subsidy - ✔✔Government payment to domestic firms.
✔✔Tariff barrier - ✔✔Trade barrier that relies on tariffs to discourage imports.
, ✔✔Theory of absolute advantage - ✔✔A theory that suggests that under free trade, a
nation gains by specializing in economic activities in which it has an absolute
advantage.
✔✔Theory of comparative advantage - ✔✔A theory that focuses on the relative (not
absolute) advantage in one economic activity that one nation enjoys in comparison with
other nations.
✔✔Theory of mercantilism - ✔✔A theory that suggests that the wealth of the world is
fixed and that a nation that exports more and imports less will be richer.
✔✔Theory of national competitive advantage of industries (diamond theory) - ✔✔A
theory that suggests that the competitive advantage of certain industries in different
nations depends on four aspects that form a "diamond."
✔✔Trade deficit - ✔✔An economic condition in which a nation imports more than it
exports.
✔✔Trade embargo - ✔✔Politically motivated trade sanctions against foreign countries
to signal displeasure.
✔✔Trade surplus - ✔✔An economic condition in which a nation exports more than it
imports.
✔✔Voluntary export restraint (VER) - ✔✔An international agreement that shows that
exporting countries voluntarily agree to restrict their exports.
✔✔Agglomeration - ✔✔Clustering of economic activities in certain locations.
✔✔Bargaining power - ✔✔Ability to extract favorable outcome from negotiations due to
one party's strengths.
✔✔Demonstration (contagion or imitation) effect - ✔✔The reaction of local firms to rise
to the challenge demonstrated by MNEs through learning and imitation.
✔✔Dissemination risk - ✔✔The risk associated with unauthorized diffusion of firm-
specific know-how.
✔✔Downstream vertical FDI - ✔✔A type of vertical FDI in which a firm engages in a
downstream stage of the value chain in a host country.
✔✔Expropriation - ✔✔Government's confiscation of foreign assets.
