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D311 Exam 2024| Questions with 100% Correct Answers |Verified
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D311 Exam 2024| Questions with 100% Correct Answers |Verified
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D311 Exam 2024| Questions with 100% CorrectAnswers |Verified
What were Ecuador's competitive position in exporting roses in regards to trade theory? (2) -
✔✔1. Natural advantage due to climate, sun, rainfall, geography, soil, land, labor availability
2. Acquired advantage due to creation of trade networks, production facilities, shipping
methods
What factors that impact globalization have also influence the growth of world trade in Roses?
(6, Ecuador Case) - ✔✔1. Liberalization of cross border trade
2. Development of services that support international business
3. Increased global competition
4. Cross - national cooperation
5. Changing political systems
6. Increasing the level of global connection between producers and new markets as well as
decreasing barriers to trade and investment
Theory of Country Size (theory to explain national trade) - ✔✔Explains how much a country
trades. Large countries tend to have relatively less dependence on trade and they export a
smaller portion of their output and import a smaller portion of their consumption. Larger
countries tend to have varied climates and a greater assortment of natural resources than
smaller economies (makes them more self-sufficient), but also higher transport costs
Theory of Economy Size (theory to explain national trade) - ✔✔Explains how much a country
trades. Large economies tend to have greater absolute values and share of the world. 10 of the
world's top 10 trading nations are high-income countries and account for more than half of all
the world's trade. China's economy, for example, has low per capita income but a large
economy due to its population
,The US is one of the world's largest traders while depending less than most countries on ___
and ___ - ✔✔imports, exports
Factor Proportions Theory (theory to explain national trade) - ✔✔Explains what types of
products a country trades. Was developed by Eli Heckscher and Bertil Ohlin which holds that
countries have their best trade advantage when depending on their relatively abundant
production factors
Four observations about the factor-proportions theory - ✔✔1. Appears logical, and a general
observation gives many examples that conform to the theory
2. Assumes production factors to be homogenous, tests to substantiate the theory have been
mixed
3. Factor proportions analysis becomes complicated when the same product can be created
through different methods (labor vs capital intensity)
4. Most new products originate in developed countries. Developing countries depend much
more on the production of primary products, thus depending on natural advantage
Country Similarity Theory (theory to explain national trade) - ✔✔Explains with whom
countries conduct trade. High-income countries trade primarily with each other, and emerging
economies primarily export primary and labor-intensive products. Economic and cultural
similarities, political interests, and distance affect the determination of trading partners
Explain how the country-similarity theory chooses a trading partner? - ✔✔companies create
new products in response to market conditions in their home market. They then turn to
markets they see as most similar to what they're accustomed to, especially in markets where
consumers have comparable levels of per capita income
In country similarity theory, explain specialization and acquired advantage? - ✔✔In order to
export, a company must provide consumers abroad with an advantage over what they could
buy from their domestic producers
, In country similarity theory, explain product differentiation? - ✔✔This causes countries to
conduct two-way trade in seemingly similar products
In country similarity theory, explain the effects of cultural similarity? - ✔✔Importers and
exporters perceive greater ease in doing business in countries that are culturally similar to their
home country, such as those that speak a common language. Historical colonial relationships
explain much of the trade between specific developed and developing countries
In country similarity theory, explain the effects of political relationships and economic
agreements? - ✔✔The creation of this may encourage or discourage trade between nations
In country similarity theory, explain the effects of distance? - ✔✔The geographic distance
between 2 countries is important as much as transport costs increase with distance
Product Life Cycle (PLC) Theory (export-dynamic theory) - ✔✔Explain how countries develop,
maintain, and lose their competitive advantage. States that the production location of certain
manufactured products shifts as they go through their life cycle. The cycle consists of 4 stages:
introduction, growth, maturity, and decline
What are the 4 stages of the product life cycle theory? - ✔✔1. Introduction
2. Growth
3. Maturity
4. Decline
Introduction stage (PLC) - ✔✔Innovation, production, and sales occur in the domestic
(innovating) country. Because the product is not yet standardized, the production process tends
to be relatively labor-intensive, and innovative customers tend to accept relatively high
introductory prices
Growth stage (PLC) - ✔✔As demand grows, competitors enter the market. Foreign demand,
competition, exports, and often direct investment activities also begin to accelerate
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