The Evolution of Trade

Question 1

the purchase, sale or exchange of goods and service across national borders

Answer 1

International trade

Question 2

occurs between different states, regions, or cities within a country.

Answer 2

domestic trade

Question 3

nations should accumulate financial wealth usually in the form of gold, by encouraging exports and discouraging imports.

Answer 3

mercantilism

Question 4

the ability of one country to produce a good or service more efficiently than other.

Answer 4

theory of absolute advantage

Question 5

who introduces the theory of absolute advantage?

Answer 5

Adam Smith

Question 6

the ability of one country that has an absolute advantage in the production of two or more good to produce one of them relatively more efficiently than the other.

Answer 6

theory of comparative advantage

Question 7

who introduces the theory of comparative advantage?

Answer 7

David Ricardo

Question 8

the loss of potential gain from other alternatives when one alternative is chosen.

Answer 8

opportunity cost

Question 9

a theory than emphasizes productivity rather than a nation’s resources; this is in line with comparative advantage.

Answer 9

New trade theory

Question 10

what are the benefits of the international trade?

Answer 10

• cheaper goods or services
• greater variety
• wider markets for the supplying country
• jobs and employment
• economic growth

Question 11

economic and strategic advantage gained by being the first company to enter the industry.

Answer 11

first-mover advantage

Question 12

are cost advantages companies gain from increasing their output.

Answer 12

economies of scale

Question 13

a nation’s competitive industry depends on the capacity of the industry to innovate and upgrade.

Answer 13

national competitive advantage theory

Question 14

who introduces the national competitive advantage theory?

Answer 14

Michael Porter

Question 15

countries produce and export goods that requires sources that are abundant and import goods that require resources in short supply.

Answer 15

Factor proportions theory

Question 16

factor proportion’s theory is also known as?

Answer 16

heckscher-ohlin theory

Question 17

who introduces the factor proportions theory?

Answer 17

Eli Heckscher and Bertil Ohlin

Question 18

a company will begin by exporting its product and later undertake foreign direct investment as the products moves through its life cycle.

Answer 18

international product life cycle theory

Question 19

all government actions that seek to alter the size of merchandise and/or service flows from and to a country.

Answer 19

trade policy

Question 20

are regulations that limit the amount or number of units of products that can be imported to a country.

Answer 20

import quotas

Question 21

are commercial and financial penalties applied by one or more countries against a targeted self-governing state.

Answer 21

economic sanctions

Question 22

it is the partial or complete prohibition of commerce and trade with a particular country/state or a group of countries.

Answer 22

trade embargo

Question 23

are government policies that restrict international trade to help domestic industries.

Answer 23

protectionism

Question 24

the removal/reduction of restrictions/barriers on the free exchange of goods between nations.

Answer 24

trade liberalization

Question 25

is a trade policy that does not restrict imports or exports

Answer 25

free trade

Question 26

a region in which a group of countries has signed a free trade agreement and maintain little or no barriers to trade in the form of tariffs or quotas between each other.

Answer 26

free trade area

Question 27

a collection of independent businesses or organizations that collude in order to manipulate the price of a product or service.

Answer 27

cartel