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INB 302 EXAM 2 QUESTIONS AND CORRECT ANSWERS 100% VERIFIED
factor mobility theory - ANSWER A countries competitiveness depends on quality andquantity of production factors
- Land
- Labor
- Capital Laissez faire - ANSWER low government intervention in the flow of trade interventionist theories - ANSWER Theories that support government intervention in theflow of trade
Free trade theories - ANSWER absolute advantage, comparative advantage,specialization
absolute advantage - ANSWER different countries produce goods more efficiently thanothers
comparative advantage - ANSWER free trade can increase global output even if onecountry has an absolute advantage in the production of all products
Free trade brings - ANSWER Specialization Natural advantageAcquired advantage Greater efficiencyHigher global profit
Mercantilism - ANSWER countries should export more than import Trade Surplus - ANSWER favorable balance of trade (governments intervene bysubsidizing goods for export)
Trade Deficit - ANSWER unfavorable balance of trade (governments intervene byimposing tariffs and quotas on imports)
Neomercantilism - ANSWER run an export surplus to achieve social or politicalobjectives
New Trade Theory - ANSWER Countries specialize in the production and export ofparticular products not because of underlying differences in factor endowments
First Mover Advantages - ANSWER the advantage gained by the initial significantoccupant of a market segment. First-mover advantage may be gained by technological leadership, or early purchase of resources (certain industries can only support a limitednumber of firms i.e. Boeing)
Theory of country size - ANSWER a theory holding that large countries usually dependless on trade than small ones Large countries usually: · export a smaller portion of output and import a smaller part of consumption · have higher transportation costs for foreign trade Factor Proportions Theory - ANSWER factors in relative abundance are cheaper thanfactors that are relatively scarce but labor factors are not homogeneous
Manufacturing Competitiveness Depends on - ANSWER New technology, which requiresskilled labor and capital to invest in R&D (industrialized countries account for most
Effects of Factor Movements - ANSWER -Factor movements alter factor endowments -Factor movements can be substantial for some countries, and insignificant for others -The movement of labor and capital are intertwined-Pros and cons of outward and inward migration (Brain drain and Remittances)
Why governments intervene in trade - ANSWER to achieve economic, social, andpolitical goals
Economic Rational - ANSWER o Fighting unemployment o Protecting infant industries o Promoting industrializationo Improving comparative position
Non-Economic rational - ANSWER o Maintaining essential industrieso Promoting acceptable practices abroad o Maintaining or extending spheres of influence o Preserving national culture Fighting unemployment - ANSWER the unemployed are the most effective pressuregroup
more restrictions can - ANSWER can lead to retaliation by other countriesare less likely retaliated against effectively by small economies *are less likely to be met with retaliation if implemented by small economies may decrease export jobs because of price increases for components may decrease export jobs because of lower incomes abroad
Protectionism - ANSWER Economic policy of shielding an economy from imports.
infant industry argument - ANSWER government protection of import competition isnecessary to help certain industries evolve from high-cost to low-cost production
Improving comparative position - ANSWER to gain fair access to foreign markets as abargaining tool believably and importance to control prices of dumping and optimum-tariff theory Dumping - ANSWER Selling goods in another country below market prices optimum-tariff theory - ANSWER a foreign producer will lower its prices if the importingcountry places a tax on its products
Competitive access argument - ANSWER To gain fair access to foreign markets Noneconomic rationales include - ANSWER o Maintaining essential industries o Promoting acceptable practices abroado Maintaining or extending spheres of influence o Preserving national culture Essential Industry Agreement - ANSWER protect essential industries so the country isnot dependent on foreign supplies during war
Promoting acceptable practices abroad - ANSWER important trade controls can beused to: promote changes in foreign countries political policies or capabilities, as a foreign policy weapon, to pressure governments to alter their stances on a variety ofissues (human rights and environmental protectionism)
Maintaining or extending spheres of influence - ANSWER Governments provideassistance and encourage imports from countries that join a political alliance
global integration - ANSWER the unification of economic policies between differentstates, through the partial or full abolition of tariff and non-tariff restrictions on trade.
Free Trade Area - ANSWER no internal tariffs, individual external tariffs Customs Union - ANSWER A group of countries committed to (1) removing all barriers tothe free flow of goods and services between each other and (2) the pursuit of a common external trade policy. Common Market - ANSWER a group of countries that acts as a single market, withouttrade barriers between member countries. Plus mobility factor (Eu citizens can work anywhere in the EU) Static effects of integration - ANSWER the shifting of resources from inefficient toefficient companies as trade barriers fall
trade creation - ANSWER production shifts to more efficient producers Trade Diversion - ANSWER trade shifts to countries in the group at the expense ofcountries not in the group
Dynamic effects of integration - ANSWER overall growth in the market - Growth allowscompanies to increase production
economies of scale - ANSWER factors that cause a producer's average cost per unit tofall as output rises
Increased competition - ANSWER o pushes companies to becomeo more efficient
European Union (EU) - ANSWER largest and most successful trade group in the world
o provides free movement of goods, services, capital, and people o has a common agricultural policy o uses common external tariffso uses a common currency
World Trade Organization (WTO) - ANSWER a permanent global institution to promoteinternational trade and to settle international trade disputes *Criticized for benefiting the rich at the expense of the poor Most Favored Nation Clause (MFN) - ANSWER trade without discrimination North American Free Trade Area (NAFTA, now USMCA) - ANSWER o Canada, USA,Mexico o Free trade of goods, services, and investmentso Static Effect: Canadian and U.S. consumers benefit from lower-cost agricultural Mexican products o Dynamic Effect: Some U.S. trade and investment has been diverted to Mexico Kohlberg's model of moral development - ANSWER preconventional, conventional, andpostconventional
preconventional morality - ANSWER first level of Kohlberg's stages of moraldevelopment in which the child's behavior is governed by the consequences of the behavior conventional morality - ANSWER second level of Kohlberg's stages of moraldevelopment in which the child's behavior is governed by conforming to the society's norms of behavior postconventional morality - ANSWER third level of Kohlberg's stages of moraldevelopment in which the person's behavior is governed by moral principles that have
Relativism - ANSWER ·ethical truths depend on the groups holding them
- E.g., "If it's OK to bribe in Country X, I guess I need to bribe when I'm in Country X" Normativism - ANSWER there are universal standards of behavior that all culturesshould follow
Pros of using the law as a moral guideline - ANSWER * The law embodies many of acountry's moral principles
- The law provides a clearly defined set of rules
- The law contains enforceable rules that apply to everyone
- The law reflects careful and wide-ranging discussions based on consensus Cons of using the law as a moral guideline - ANSWER * Some things that are unethicalare not illegal
- Laws are slow to develop in emerging areas of concern and develop in response toevents that have happened (can't anticipate)
- Laws may be based on imprecisely defined moral concepts
- The law often needs to undergo scrutiny by the courts
- The law is not very efficient (i.e., achieving ethical behavior at low cost) bribery - ANSWER when someone voluntarily offers payment to get an illegal advantage Sustainability - ANSWER meeting the needs of the present without compromising theability of future generations to meet their own needs
Labor Conditions - ANSWER People worked in poorly built factories that were poorly lit,unventilated, for 12-16 hours a day, 6 days a week, every week a year, with low wages. Child labor was common. codes of conduct - ANSWER * sets global policy that must be complied with
- communicates the code to employees, suppliers, and subcontractors
- ensures that policies are carried out
- reports results to external stakeholders value - ANSWER the measure of a firm's capability of selling what it makes for more thanthe costs incurred to make it
Two ways to create value - ANSWER cost leadership and differentiation Cost Leadership - ANSWER make products for a lower cost than competitors Differentiation - ANSWER make products for which consumers are willing to pay apremium price
Value Chain - ANSWER the series of internal departments that carry out value-creatingactivities to design, produce, market, deliver, and support a firm's products
Primary activities in the value chain - ANSWER design, make, sell, and deliver theproduct
support activities - ANSWER implement primary activities configuration - ANSWER distributing value chain activities around the world - to achievelocation economies
concentrated - ANSWER putting all value chain activities in one location dispersed - ANSWER performing different value chain activities in different locations
a. fiscal, monetary, and business regulations Global Strategy - ANSWER selling the same standardized product and using the samebasic marketing approach in each national market
Transnational Strategy - ANSWER strategy that attempts to combine the benefits of alocalization strategy (high local responsiveness) with those of a global-standardization strategy (lowest-cost position attainable) International Strategy - ANSWER a strategy through which the firm sells its goods orservices outside its domestic market. high global integration but low local responsiveness multidomestic strategy - ANSWER customizing products and marketing strategies tospecific national conditions. Low global integration and high local responsiveness
diversification strategy - ANSWER go to many markets fast and then build up slowly ineach
Concentration strategy - ANSWER go to one or a few markets and build up fast beforegoing to others
Reinvestment - ANSWER making new commitments to maintain competitiveness Harvesting (divesting) - ANSWER reducing commitments because they do not fit theoverall strategy or because there are more attractive alternatives
