C211 OA FINAL STUDY GUIDE 2026
COMPLETE QUESTIONS AND
ANSWERS.
■ comparative advantage. Answer: is the relative (not absolute)
advantage in one absolute activity that one nation enjoys in
comparison with other nations
■ Mercantilism. Answer: Classical trade theory that viewed
international trade as a zero-sum game
■ What are the critical features of the product life cycle? Answer: An
economic theory that accounts for changes in the patterns of trade
over time
■ How would you describe strategic trade? Answer: A theory that
suggests that strategic intervention by governments in certain
industries can enhance their odds for international success
■ How are supply and demand related to the exchange rate of a
country? Answer: Exchange rates rise and fall based on the
underlying economic conditions that prompt traders, investors and
others to want more of a particular currency.
■ Which theory came first, mercantilism or modern-day
protectionism? Answer: Mercantilism: As protectionism is the idea
,that governments should protect domestic industries from imports &
vigorously promote exports
■ If a company seeks to limit foreign exchange rate exposure in the
forward direction, what is the most effective way to do this? Answer:
This can be accomplished by hedging
■ Explain the concept of "hedging" as it relates to reducing various
types of risk. Answer: Strategies or Tools used =Hedging
Risk associated with =Transaction risks
They use hedging to minimize transaction risks
■ What is transaction risk? Answer: The Risk that a company will
incur losses due to an adverse change in the relevant foreign exchange
rate
■ Strategic hedging. Answer: spreading out actives in a number of
different currency zones to offset any currency losses in one region
through gains in another region.
■ currency hedging. Answer: A transaction that protects traders and
investors from exposure to the fluctuations of the spot rate.
■ What advantages exist with first mover? Answer: 1-They gain
advantage through proprietary technology
2-They make pre-emptive investments
3-They erect significant entry barriers for late entrants, such as high
switching cost due to locality
, 4- They may build relationships with key stake holders (customers &
governments)
■ What advantages exist with late mover? Answer: 1-Late movers
can free-ride on first movers pioneering investments
2-First movers face technological & market uncertainties
3-First movers may be locked into a given set of fixed assets
■ Consider the model of foreign market entries. How is scale-of-entry
related/relevant? Answer: - First mover advantages and large scale
are linked
- Small scale entry means learning at low risk
- Entry in small or large potential market may require the same level
of initial resources
■ How do institutions reduce uncertainty? Answer: by constraining
the range of acceptable actions
■ Regulatory pillar. Answer: The coercive power of governments.
■ Normative pillar. Answer: The mechanism through which norms
influence individual and firm behavior.
■ Cognitive pillar. Answer: The internalized (or taken-forgranted)
values and beliefs that guide individual and firm behavior.
COMPLETE QUESTIONS AND
ANSWERS.
■ comparative advantage. Answer: is the relative (not absolute)
advantage in one absolute activity that one nation enjoys in
comparison with other nations
■ Mercantilism. Answer: Classical trade theory that viewed
international trade as a zero-sum game
■ What are the critical features of the product life cycle? Answer: An
economic theory that accounts for changes in the patterns of trade
over time
■ How would you describe strategic trade? Answer: A theory that
suggests that strategic intervention by governments in certain
industries can enhance their odds for international success
■ How are supply and demand related to the exchange rate of a
country? Answer: Exchange rates rise and fall based on the
underlying economic conditions that prompt traders, investors and
others to want more of a particular currency.
■ Which theory came first, mercantilism or modern-day
protectionism? Answer: Mercantilism: As protectionism is the idea
,that governments should protect domestic industries from imports &
vigorously promote exports
■ If a company seeks to limit foreign exchange rate exposure in the
forward direction, what is the most effective way to do this? Answer:
This can be accomplished by hedging
■ Explain the concept of "hedging" as it relates to reducing various
types of risk. Answer: Strategies or Tools used =Hedging
Risk associated with =Transaction risks
They use hedging to minimize transaction risks
■ What is transaction risk? Answer: The Risk that a company will
incur losses due to an adverse change in the relevant foreign exchange
rate
■ Strategic hedging. Answer: spreading out actives in a number of
different currency zones to offset any currency losses in one region
through gains in another region.
■ currency hedging. Answer: A transaction that protects traders and
investors from exposure to the fluctuations of the spot rate.
■ What advantages exist with first mover? Answer: 1-They gain
advantage through proprietary technology
2-They make pre-emptive investments
3-They erect significant entry barriers for late entrants, such as high
switching cost due to locality
, 4- They may build relationships with key stake holders (customers &
governments)
■ What advantages exist with late mover? Answer: 1-Late movers
can free-ride on first movers pioneering investments
2-First movers face technological & market uncertainties
3-First movers may be locked into a given set of fixed assets
■ Consider the model of foreign market entries. How is scale-of-entry
related/relevant? Answer: - First mover advantages and large scale
are linked
- Small scale entry means learning at low risk
- Entry in small or large potential market may require the same level
of initial resources
■ How do institutions reduce uncertainty? Answer: by constraining
the range of acceptable actions
■ Regulatory pillar. Answer: The coercive power of governments.
■ Normative pillar. Answer: The mechanism through which norms
influence individual and firm behavior.
■ Cognitive pillar. Answer: The internalized (or taken-forgranted)
values and beliefs that guide individual and firm behavior.
