WGU Global Business CHp 2 Exam Questions and Answers
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1- A greater amount of
choice in the availability of
goods and services
2 - Lower prices for goods and services consumed
3 - Higher living standards - ANSWER What are the benefits of trade?
- Generates jobs
- creates unity by erasing borders
- brings cultural and technical riches
- en...
wgu global business chp 2 exam questions and answers
what are the benefits of trade
what are the benefits of foreign investment
what are the major international trade theories and what are key f
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WGU Global Business CHp 2
1- A greater amount of
choice in the availability of
goods and services
2 - Lower prices for goods and services consumed
3 - Higher living standards - ANSWER What are the benefits of trade?
- Generates jobs
- creates unity by erasing borders
- brings cultural and technical riches
- enhances the skills of domestic workers - ANSWER What are the benefits of foreign
investment?
-Mercantilism
-Absolute Advantage
- Theory of Comparative Advantage
- Heckscher-Ohlin Theory
- Factor Price Equalization Theory
- Porter's Diamond Model - ANSWER What are the major international trade theories
and what are key features of each one?
Gov't actions altering free flow of merch to and from a country
Historically, main instrument has been import tariff (but now, non-tariff barriers and
export subsidies are more prevalent) - ANSWER What is the impact of trade policy on
various stakeholders such as businesses, consumers, and governments?
Refers to agreements, sometimes temporary, between countries (or a group of
countries) that aim to achieve certain trade outcomes for the countries involved.
Managed trade aims to replace global market or economic forces with government
actions to determine trade outcomes - ANSWER What is the rationale for managing
trade?
Mercantilism - ANSWER Can only gain from trade if it has trade surplus.
More export, less import
"I sold more goods than I bought, so I win."
gold & silver are very important to country wealth
16th, 17th century Great Brittan
Key words: trade surplus
Absolute Advantage - ANSWER Whoever produces more has the absolute advantage.
key words: specialization & absolute quantities
Criticises mercantilism
Proposed by Adam Smith
, WGU Global Business CHp 2
Brazil makes more coffee than the U.S. (win, win)
can have as much as you want and trade as much as you want for something different.
Increase in living standards
Competitive Advantage - ANSWER Key word: Opportunity cost
Brazil has coffee beans and if the US wanted to produce coffee beans they would be
giving up other opportunities (like corn). Brazil does coffee beans at little opportunity
cost.
Less opportunity cost=Higher comparative advantage
Always pick the item with the least opportunity cost
H-O Theory (Heckscher-Ohlin) - ANSWER Key words: factor endorsement equalization
The reason Brazil is better with coffee and US is better with corn is because of what
each country has to work with.
Factors of production: labor, land, resources
Explains the reason for the comparative advantage
Factor-Price Equalization - ANSWER Follows the H-O Theory
Allows labor resources to move freely
Large supply of plumbers in Poland, pay down.
Plumber move to U.K. where there is great demand, pay up
Eventually supply and demand even out.
Doesn't really work because people aren't really allowed to move around freely.
Porter's Diamond Model - ANSWER Trade pattern and competitive advantage is
determined by: Factor conditions, Firm strategy, structure, rivalry, demand conditions,
and related and supporting industries.
The more you produce the better you are.
International Business - ANSWER all commercial transactions, both private and public
between nations of the world
factors of production - ANSWER endowments used to produce goods and services:
land, labor, capital, and technology.
Foreign Direct Investment FDI - ANSWER inflows of capital from abroad for investing in
domestic plant and equipment for the production of goods and/or services as well as for
buying domestic companies
Trade - ANSWER the two-way flow of exports and imports of goods (merchandise
trade) and services (service trade)
outsourced - ANSWER the corporate practice of acquiring or producing quality goods or
services abroad at a lower cost thereby eliminating domestic production
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