QUIZ 2 Flashcards
(31 cards)
absolute advantage principle
a country benefits by producing the goods for which it has an absolute advantage, and are able to produce using fewer resources than other countries.
comparative advantage
On a GLOBAL SCALE natural and acquired advantages. Argument for global trade without protectionism. countries without absolute advantage can help larger countries by producing the other countries least advantageous products.
comparative advantage principle
Countries benefit from exporting the goods that they have a comparative advantage over other countries.
competitive advantage
gained from specific competencies of a FIRM ex. cost, price, innovation
free trade
results in: more ability to purchase, imports are cheaper, forcing price down, reduce company expenses and raise profits, lower cost imports help consumers save money, increases prosperity
industrial cluster
concentration of companies from the same industry in the same location. Costs and time are saved because everyone is close. Ex. silicon valley
mercantilism
increasing exports, decreasing imports in order to gain wealth
national industrial policy
efforts by government to direct resources into developing expertise in a certain industry
internationalization
companies expand gradually, staring with exporting, and then growing into FDI. Born global firms expand at or near their founding.
monopolistic advantage theory
MNE’s are large and gain capabilities other firms don’t possess.
factor proportions theory
- products differ from types to quantities and factors of production.
- countries differ in quantities and types of factors.
THEREFORE, we should export what we have a lot of and import what is scarce.
non-tariff trade barrier
puts a quota on what can be imported and NOT A TAX
internalization
firms internalize the value chain to make more money. ex: vertical integration
country risk
risks of national political and legal environments.
extraterritoriality
application of home country laws to conduct outside the country’s borders
legal system
- common law- US federal GOV
- civil law - private relations in community
- religious law
- Mixed systems
political system
- Totalitarianism- command economy- Cuba
- Socialism- mixed economies- collective welfare of people- china, bolivia
- Democracy- market economies- Private property rights, limited governmnet- EX. australia, japan
rule of law
laws are clear, enforced, and accepted
FCPA foreign corrupt practices act
prevents bribes abroad
antidumping duty
a tax on companies when they are selling at an abnormally low cost
countervailing duty
Government tries to offset foreign subsidies or aid. ex. antidumping duty.
currency control
minimize national withdrawal of foreign currency. restrict outflow of widely used currencies.
dumping
firm charges abnormally low price abroad
export control
limits trade in products that are important to national security
