Chapter 6- International Trade Theory Flashcards Preview

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Flashcards in Chapter 6- International Trade Theory Deck (13)
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1
Q

zero sum game; you should export more than you import so you have more of the gold than everyone else

A

mercantilism

2
Q

countries should make things they have an absolute advantage in and buy things they don’t have an AA in; world as a whole will be better if we all trade with each other

A

Adam Smith; Wealth of Nations; invisible hand of the marketplace

3
Q

should we return to mercantilism and buy things that are more expensive but made domestically

A

neo-mercantilism

4
Q

basic idea of Adam Smith but what if one has a AA in everything then still have a 0 sum game; better to look at comparative advantage; opportunity loss concept; import things we can’t make as efficiently

A

David Ricardo and comparative advantage; how much does a country have to give up to make something

5
Q

what are some flaws in Smith and Ricardo’s theories

A

they are assuming away transportation costs and assuming resources can move freely between industries

6
Q

should focus on the factor endowments that a country has and that is how you decide what to make

A

Hecksher-Olin; looks at comparative advantage in a different way

7
Q

to the extend that a country is endowed with certain resources should be making certain products based on the factors we have

A

factor endowments

8
Q

it helps to have a large domestic market to introduce new products to like the US has; also a product will start out being made and sold in its domestic market but as it expands it will be made in areas where it is the cheapest

A

Ramon Vernon; Product Life Cycle Theory; the wealth and size of the US market gave firms the incentive to develop the new consumer products; his theories were a major driver for the formation of the EU

9
Q

when a company establishes the competitive advantage at the beginning; works especially well where the world economy can only support a few companies; ex. Boeing

A

first mover advantage which is a part of the New Trade Theory

10
Q

helps understand the competitive advantage nations possess due to certain factors and to explain how governments can act as catalysts to improve a country’s position in a globally competitive economic environment

A

the Porter Diamond developed by Michael Porter

11
Q

economies of scale and first mover advantage

A

new trade theory

12
Q

factor endowments, demand conditions, related and supporting industries, and firm strategy, structure, and rivalry

A

national competitive advantage: Porter’s Diamond

13
Q

we’ve created an environment where the consumer’s fell they are at odds with business and government should regulate; all these things should go hand in hand; need and everyone benefits mentality

A

Porter’s shared value theorem