D311 Exam 1 UPDATED ACTUAL Questions and CORRECT Answers
1. o Holds that a country's wealth is measured by Mercantilism
its holdings of "treasure", which usually means
its gold.
2. What is the governmental policy of mercantil- to export more than they import-
ism? ed, governments imposed restric-
tions on most imports and they sub-
sidized products for export
3. o favorable balance of trade trade surplus
4. unfavorable balance of trade trade deficit
5. the running of a favorable balance of trade (run Neomercantilism
an export surplus) to achieve some social or
political objective.
6. What was Adam Smith's idea on wealth? asserted that the wealth of a nation
consisted of its citizens' access to
goods and services.
7. A country can maximize its own economic Absolute advantage
well-being by specializing in the production of
those goods and services that it can produce
more efficiently than any other nation and en-
hance global efficiency through its participa-
tion in (unrestricted) free trade.
8. What are the three benefits of specialization? (i) workers become more skilled by
repeating the same tasks;
(ii) workers do not lose time in
switching from the production of
one kind of product to another; and
, (iii) long production runs provide
greater incentives for the devel-
opment of more effective working
methods.
9. advantage in the production of particular prod- natural advantage
ucts because of given climatic conditions, ac-
cess to particular resources, the availability of
labor, etc. Variations in among
countries help to explain where particular prod-
ucts can be produced most efficiently
10. represents a distinct advantage in product or acquired advantage
process technology that yields differentiated
product offerings and/or cost-competitive ho-
mogeneous products. Technology, in particular,
has created new products, displaced old prod-
ucts, and altered trading-partner relationships.
11. there would still be gains from trade if a country Theory of comparative advantage
specialized in the production of those things
it can produce most efficiently, even if other
countries can produce those same things even
more efficiently.
12. A country can simultaneously have a compar- Production Possibility.
ative advantage and an absolute advantage in
the production of a given product.
13. Explain how trade theory explains Ecuador's -Natural advantage due to climate,
competitive position in exporting roses. sun, rainfall, geography, soil, land,
and labor availability.
-Acquired advantage due to creation
, of trade networks, production facili-
ties, shipping methods.
-Specialization may provide incre-
mental comparative advantage.
14. Large countries tend to have relatively -less
dependence on trade. -They export a smaller portion of
their output and import a smaller
portion of their consumption.
15. Large economies tend to have greater absolute values
and share of world trade.
16. theory holds that countries have their best factor-proportions theory
trade advantage when depending on their rel-
atively abundant production factors
17. says that companies create new products in country-similarity theory
response to market conditions in their home
market. They then turn to markets they see as
most similar to what they are accustomed, es-
pecially those markets where consumers have
comparable levels of per capita income.
18. states that the production location of cer- product life cycle theory
tain manufactured products shifts as they go
through their life cycle. The cycle consists of
four stages: introduction, growth, maturity, and
decline
19. Innovation, production, and sales occur in the Introduction stage of the Product
domestic (innovating) country. Because the Life Cycle Theory
product is not yet standardized, the production
1. o Holds that a country's wealth is measured by Mercantilism
its holdings of "treasure", which usually means
its gold.
2. What is the governmental policy of mercantil- to export more than they import-
ism? ed, governments imposed restric-
tions on most imports and they sub-
sidized products for export
3. o favorable balance of trade trade surplus
4. unfavorable balance of trade trade deficit
5. the running of a favorable balance of trade (run Neomercantilism
an export surplus) to achieve some social or
political objective.
6. What was Adam Smith's idea on wealth? asserted that the wealth of a nation
consisted of its citizens' access to
goods and services.
7. A country can maximize its own economic Absolute advantage
well-being by specializing in the production of
those goods and services that it can produce
more efficiently than any other nation and en-
hance global efficiency through its participa-
tion in (unrestricted) free trade.
8. What are the three benefits of specialization? (i) workers become more skilled by
repeating the same tasks;
(ii) workers do not lose time in
switching from the production of
one kind of product to another; and
, (iii) long production runs provide
greater incentives for the devel-
opment of more effective working
methods.
9. advantage in the production of particular prod- natural advantage
ucts because of given climatic conditions, ac-
cess to particular resources, the availability of
labor, etc. Variations in among
countries help to explain where particular prod-
ucts can be produced most efficiently
10. represents a distinct advantage in product or acquired advantage
process technology that yields differentiated
product offerings and/or cost-competitive ho-
mogeneous products. Technology, in particular,
has created new products, displaced old prod-
ucts, and altered trading-partner relationships.
11. there would still be gains from trade if a country Theory of comparative advantage
specialized in the production of those things
it can produce most efficiently, even if other
countries can produce those same things even
more efficiently.
12. A country can simultaneously have a compar- Production Possibility.
ative advantage and an absolute advantage in
the production of a given product.
13. Explain how trade theory explains Ecuador's -Natural advantage due to climate,
competitive position in exporting roses. sun, rainfall, geography, soil, land,
and labor availability.
-Acquired advantage due to creation
, of trade networks, production facili-
ties, shipping methods.
-Specialization may provide incre-
mental comparative advantage.
14. Large countries tend to have relatively -less
dependence on trade. -They export a smaller portion of
their output and import a smaller
portion of their consumption.
15. Large economies tend to have greater absolute values
and share of world trade.
16. theory holds that countries have their best factor-proportions theory
trade advantage when depending on their rel-
atively abundant production factors
17. says that companies create new products in country-similarity theory
response to market conditions in their home
market. They then turn to markets they see as
most similar to what they are accustomed, es-
pecially those markets where consumers have
comparable levels of per capita income.
18. states that the production location of cer- product life cycle theory
tain manufactured products shifts as they go
through their life cycle. The cycle consists of
four stages: introduction, growth, maturity, and
decline
19. Innovation, production, and sales occur in the Introduction stage of the Product
domestic (innovating) country. Because the Life Cycle Theory
product is not yet standardized, the production
