1.) Which of the following theories does not support the case for unrestricted free trade?
a. The absolute advantage theory
b. The comparative trade theory
c. The Hechscher-Ohlin factor proportions theory
d. None of the above
2.) A study made in the 1950s showed that the US exports were about 30% more labor-intensive (produced using the labor-intensive method of production) than its imports. The study contradicts the predictions of which of the following trade theories:
a. The absolute advantage theory
b. The comparative advantage theory
c. The Heckscher - Ohlin theory
d. The product life cycle theory
3.) Consider a country whose government believes in protecting national identity and building a self-sustained economy. The government's priority is to protect local jobs and provide opportunities to its emerging industries to flourish without the threat of external competition. The country's effort to provide opportunities to its emerging industries is an example of its _____.
a. political motive
b. economic motive
c. cultural motive
d. social motive
4.) Suppose the Canadian government subsidizes domestic wheat production and then sells surpluses on the world market at a price below the cost of production. In foreign countries, the argument that would be made to restrict wheat trade with Canada would be the:
a. penalizes lax environmental standards argument.
b. saves jobs argument.
c. infant-industry argument.
d. dumping argument.
5.) When the United States imports goods from the rest of the world, which of the following parties are harmed?
i. domestic producers of the good
ii. domestic consumers of the good
iii. foreign producers of the good
a. i only
b. ii only
c. iii only
d. i and iii
6.) The WTO possesses mechanisms for imposing trade sanctions on countries that violate world trade agreements. True or False
7.) Suppose a Japanese company plans for a production system in which two components of its product will be manufactured in locations where the cost of production is lowest. The components will then be taken to Shanghai (China) for the final assembly. The company plans to purchase an existing company in Brazil to produce component A and build a subsidiary in Thailand to produce component B. The company's investments are examples of _____.
a. foreign direct investment
b. portfolio investment
c. vertical integration
d. horizontal integration
8.) Refer to the information in question 7, above. The company's purchase of the Brazilian company is best classified as a(n) _____.
a. greenfield investment
b. portfolio investment
c. acquisition
9.) Refer to the information given in question 7, above. The company's subsidiary for component B in Thailand is best described as a(n) _____.
a. greenfield investment
b. portfolio investment
c. acquisition
d. merger
e. demerger
10.) A computer chip manufacturer Chinese MNE, uses only a few carefully selected manufacturing sites in several countries, but always as fully-owned operations. This strategic choice is explained by which of the following economic theories?
a. the theory strategic behavior
b. the product life cycle theory
c. the internalization theory
d. the multipoint competition theory
11.) The regional trade agreement between Canada, Mexico, and the United States to eliminate tariffs and non-tariff barriers between themselves is known as the _____.
a. Central American Free Trade Agreement
b. Andean Community Caribbean Community and Common Market
c. North American Free Trade Agreement
12.) A free trade area entails closer economic integration and cooperation than a common market. True or False
13.) A small country was invited to join a regional trading bloc. The government of this country is considering the benefits and costs of joining such a bloc. The government is attracted by the fact that this trading bloc requires the country to give up only the least amount of sovereignty compared to other types of blocs. The regional trading bloc that this country will be joining is most likely a(n) _____.
a. economic union
b. free trade area
c. customs union
d. political union
14.) How has the euro contributed to increased competition in the European region?
a. By making price comparisons easy.
b. By increasing hedging costs.
c. By increasing the cost of capital
d. By enabling a common monetary policy
The questions are based on various different concepts and theories of economics. Heckscher-Ohlin Model in economics means that the countries produce and export what they can produce plentifully. The model focuses on the exports of those goods that a country has in abundance.
