International Business Chapter 6 Latest Version 100% Pass

International Business Chapter 6 Latest Version 100% Pass What is international trade? Why does it occur? International trade is trade between residents of two countries. The residents may be individuals, firms, not-for-profit organizations, or other forms of associations. Occur because both parties believe they benefit from the voluntary exchange. How do the theories of absolute advantage and comparative advantage differ? Absolute advantage: suggest that a country should export those goods and service for which it more productive than other countries are and import those goods and services for which other countries are more productive than it is. Comparative Advantage,. a country should produce and export those goods and services for which it is RELATIVELY more productive than other countries are and import those goods and services for which other countries are RELATIVELY more productive than it is. Absolute Advantage looks at the absolute productivity differences: Comparative Advantage looks at productivity differences. the distinction occurs because comparative advantage incorporates the concept of Opportunity cost in determining which good a country should produce. Why are Leontief's findings called paradox? Leontief assumed there are two homogeneous factors of production: Labor & capital. yet other factors of production exist, most notably land, human capital, and technology-- none of which were included in Leontief's analysis. ---- failure to measure the role that these factors of production play in determining international trade patterns may account for his paradoxical results. How useful are country-based theories in explaining international trade? Country-based theories are particularly useful for describing trade in commodities--Standardized, undifferentiated good such as oil, sugar, wheat or lumber that are typically bought on the basis of price rather than brand name. How do interindustry and intraindustry trade differ? Interindustry trade: is the exchange of goods produced by one industry in country A for goods produced by a different industry in country B. Intraindustry trade: trade between two countries of goods produce by the same industry. . japan exports Toyotas to Germany,