WGU C211 GLOBAL BUSINESS CHP 2
LEGITIMATE QUESTIONS AND
ANSWERS
What are the benefits of trade? - ✔✔1- A greater amount of
choice in the availability of
goods and services
2 - Lower prices for goods and services consumed
3 - Higher living standards
What are the benefits of foreign investment? - ✔✔- Generates jobs
- creates unity by erasing borders
- brings cultural and technical riches
- enhances the skills of domestic workers
What are the major international trade theories and what are key features of each one?
- ✔✔-Mercantilism
-Absolute Advantage
- Theory of Comparative Advantage
- Heckscher-Ohlin Theory
- Factor Price Equalization Theory
- Porter's Diamond Model
What is the impact of trade policy on various stakeholders such as businesses,
consumers, and governments? - ✔✔Gov't actions altering free flow of merch to and
from a country
Historically, main instrument has been import tariff (but now, non-tariff barriers and
export subsidies are more prevalent)
What is the rationale for managing trade? - ✔✔Refers to agreements, sometimes
temporary, between countries (or a group of countries) that aim to achieve certain trade
outcomes for the countries involved.
Managed trade aims to replace global market or economic forces with government
actions to determine trade outcomes
Can only gain from trade if it has trade surplus.
, More export, less import
"I sold more goods than I bought, so I win."
gold & silver are very important to country wealth
16th, 17th century Great Brittan
Key words: trade surplus - ✔✔Mercantilism
Whoever produces more has the absolute advantage.
key words: specialization & absolute quantities
Criticises mercantilism
Proposed by Adam Smith
Brazil makes more coffee than the U.S. (win, win)
can have as much as you want and trade as much as you want for something different.
Increase in living standards - ✔✔Absolute Advantage
Key word: Opportunity cost
Brazil has coffee beans and if the US wanted to produce coffee beans they would be
giving up other opportunities (like corn). Brazil does coffee beans at little opportunity
cost.
Less opportunity cost=Higher comparative advantage
Always pick the item with the least opportunity cost - ✔✔Competitive Advantage
Key words: factor endorsement equalization
The reason Brazil is better with coffee and US is better with corn is because of what
each country has to work with.
Factors of production: labor, land, resources
Explains the reason for the comparative advantage - ✔✔H-O Theory (Heckscher-Ohlin)
Follows the H-O Theory
Allows labor resources to move freely
Large supply of plumbers in Poland, pay down.
Plumber move to U.K. where there is great demand, pay up
Eventually supply and demand even out.
Doesn't really work because people aren't really allowed to move around freely. -
✔✔Factor-Price Equalization
Trade pattern and competitive advantage is determined by: Factor conditions, Firm
strategy, structure, rivalry, demand conditions, and related and supporting industries.
The more you produce the better you are. - ✔✔Porter's Diamond Model
all commercial transactions, both private and public between nations of the world -
✔✔International Business
endowments used to produce goods and services: land, labor, capital, and technology. -
✔✔factors of production
LEGITIMATE QUESTIONS AND
ANSWERS
What are the benefits of trade? - ✔✔1- A greater amount of
choice in the availability of
goods and services
2 - Lower prices for goods and services consumed
3 - Higher living standards
What are the benefits of foreign investment? - ✔✔- Generates jobs
- creates unity by erasing borders
- brings cultural and technical riches
- enhances the skills of domestic workers
What are the major international trade theories and what are key features of each one?
- ✔✔-Mercantilism
-Absolute Advantage
- Theory of Comparative Advantage
- Heckscher-Ohlin Theory
- Factor Price Equalization Theory
- Porter's Diamond Model
What is the impact of trade policy on various stakeholders such as businesses,
consumers, and governments? - ✔✔Gov't actions altering free flow of merch to and
from a country
Historically, main instrument has been import tariff (but now, non-tariff barriers and
export subsidies are more prevalent)
What is the rationale for managing trade? - ✔✔Refers to agreements, sometimes
temporary, between countries (or a group of countries) that aim to achieve certain trade
outcomes for the countries involved.
Managed trade aims to replace global market or economic forces with government
actions to determine trade outcomes
Can only gain from trade if it has trade surplus.
, More export, less import
"I sold more goods than I bought, so I win."
gold & silver are very important to country wealth
16th, 17th century Great Brittan
Key words: trade surplus - ✔✔Mercantilism
Whoever produces more has the absolute advantage.
key words: specialization & absolute quantities
Criticises mercantilism
Proposed by Adam Smith
Brazil makes more coffee than the U.S. (win, win)
can have as much as you want and trade as much as you want for something different.
Increase in living standards - ✔✔Absolute Advantage
Key word: Opportunity cost
Brazil has coffee beans and if the US wanted to produce coffee beans they would be
giving up other opportunities (like corn). Brazil does coffee beans at little opportunity
cost.
Less opportunity cost=Higher comparative advantage
Always pick the item with the least opportunity cost - ✔✔Competitive Advantage
Key words: factor endorsement equalization
The reason Brazil is better with coffee and US is better with corn is because of what
each country has to work with.
Factors of production: labor, land, resources
Explains the reason for the comparative advantage - ✔✔H-O Theory (Heckscher-Ohlin)
Follows the H-O Theory
Allows labor resources to move freely
Large supply of plumbers in Poland, pay down.
Plumber move to U.K. where there is great demand, pay up
Eventually supply and demand even out.
Doesn't really work because people aren't really allowed to move around freely. -
✔✔Factor-Price Equalization
Trade pattern and competitive advantage is determined by: Factor conditions, Firm
strategy, structure, rivalry, demand conditions, and related and supporting industries.
The more you produce the better you are. - ✔✔Porter's Diamond Model
all commercial transactions, both private and public between nations of the world -
✔✔International Business
endowments used to produce goods and services: land, labor, capital, and technology. -
✔✔factors of production
