Mkt 310 Exam 2 Study Guide
MKT 310 : Exam 2 Study Guide
BOOK
Ch.5 : International Trade Theory
An Overview of Trade Theory: * The Benefits of Trade – Some international trade is beneficial, exchange products you can produce at a low cost for some products you cannot produce at all * Free Trade – The absence of government barriers to the free flow of goods and services between countries. * International trade allows a country to specialize in the manufacture and export of products it can produce most efficiently while importing products that can be produced more efficiently in other countries. * Climate and natural resources explain why Ghana exports cocoa, and Saudi Arabia exports oil * Product Life-Cycle Theory – Early in their life cycles, most new products are produced in and exported from the country in which they were developed. As the product becomes accepted internationally, production begins to start in other countries. Thus suggesting that the product may ultimately be exported back to the country of its original innovation. * New Trade Theory – Theory that sometimes countries specialize in the production and export of particular products not because of underlying differences in factor endowments, but because in certain industries the world market can support only a limited number of firms.
Mercantilism:
* Mercantilism – Originated in England, An economic philosophy advocating that countries should simultaneously encourage exports and discourage imports. It was in the countries best interest to maintain a trade surplus, to export more than it imported. Also advocated government intervention to achieve a surplus in the balance of trade. * Zero-Sum Game – A situation in which an economic gain by one country results in an economic loss by another. The flaw with Mercantilism is that it is viewed as a Zero-Sum Game. * Critics think China is pursuing a neo-mercantilist society, deliberately keeping its currency value low against the U.S. dollar in
BOOK
Ch.5 : International Trade Theory
An Overview of Trade Theory: * The Benefits of Trade – Some international trade is beneficial, exchange products you can produce at a low cost for some products you cannot produce at all * Free Trade – The absence of government barriers to the free flow of goods and services between countries. * International trade allows a country to specialize in the manufacture and export of products it can produce most efficiently while importing products that can be produced more efficiently in other countries. * Climate and natural resources explain why Ghana exports cocoa, and Saudi Arabia exports oil * Product Life-Cycle Theory – Early in their life cycles, most new products are produced in and exported from the country in which they were developed. As the product becomes accepted internationally, production begins to start in other countries. Thus suggesting that the product may ultimately be exported back to the country of its original innovation. * New Trade Theory – Theory that sometimes countries specialize in the production and export of particular products not because of underlying differences in factor endowments, but because in certain industries the world market can support only a limited number of firms.
Mercantilism:
* Mercantilism – Originated in England, An economic philosophy advocating that countries should simultaneously encourage exports and discourage imports. It was in the countries best interest to maintain a trade surplus, to export more than it imported. Also advocated government intervention to achieve a surplus in the balance of trade. * Zero-Sum Game – A situation in which an economic gain by one country results in an economic loss by another. The flaw with Mercantilism is that it is viewed as a Zero-Sum Game. * Critics think China is pursuing a neo-mercantilist society, deliberately keeping its currency value low against the U.S. dollar in