Name: Class: Date: Ver: 1

final exam T/f

Indicate the answer choice that best completes the statement or answers the question.
1. Deadweight costs are net losses that occur when _____ are imposed.
a. import quotas
b. local content requirements
c. voluntary export restraints
d. import tariffs

2. If the forward rate of the euro per dollar is higher than the spot rate, the euro has a _____.
a. forward premium
b. high spread
c. forward discount
d. low spread

3. ____ best suits situations where the pressures to globalize are relatively low, and local firms' strengths lie in a
deep understanding of local markets.
a. Contender strategy
b. Defender strategy
c. Dodger strategy
d. Extender strategy

Indicate whether the statement is true or false.

4. Deadweight costs occur in an economy as a result of VER.
a. True
b. False

Indicate the answer choice that best completes the statement or answers the question.
5. Which of the following was the first international trade theory to account for changes in the patterns of trade
over time?
a. Product life cycle theory
b. Comparative advantage theory
c. Factor endowment theory
d. Absolute advantage theory

6. Protectionism is similar to mercantilism as they both advocated _____.

a. developing comparative advantages based on a nation’s locally abundant factors
b. specializing in economic activities in which a nation can have an absolute advantage
c. dividing the nations of the world into three categories based on its innovation capabilities
d. government involvement in international trade

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Name: Class: Date: Ver: 1

final exam T/f

Indicate whether the statement is true or false.

7. Making a rival aware of an attack makes it easier for the attacker to achieve its objective.
a. True
b. False

8. Low barriers to entry into an industry make collusion between firms difficult.
a. True
b. False

Indicate the answer choice that best completes the statement or answers the question.
9. _____ are restrictions on the quantity of imports.
a. Subsidies
b. Import quotas
c. VERs
d. Antidumping duties

Indicate whether the statement is true or false.

10. A low degree of market commonality suggests that if a firm attacks in one market, its rivals may engage in
cross-market retaliation.
a. True
b. False

Indicate the answer choice that best completes the statement or answers the question.
11. Which of the following sets of words describes the initial set of actions a firm uses to gain competitive
advantage and the other firm's response to it?
a. Attack, counterattack
b. Tacit collusion, explicit collusion
c. Competition, cooperation
d. Cooperation, signaling

12. A trade _____ is an economic condition in which a nation imports more than it exports.
a. surplus
b. VER
c. deficit
d. embargo

Indicate whether the statement is true or false.

13. Local content requirements require a certain proportion of the value of the goods made in one country to
originate from that country.
a. True
b. False

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Name: Class: Date: Ver: 1

final exam T/f

Indicate the answer choice that best completes the statement or answers the question.
14. ____ is the strategy that focuses on a firm engaging in rapid learning and then expanding overseas.
a. Dodger strategy
b. Extender strategy
c. Defender strategy
d. Contender strategy

Indicate whether the statement is true or false.

15. In the context of tariff barriers, deadweight = total inefficiency - net gain.
a. True
b. False

16. Competitive dynamics are the actions and responses undertaken by competing firms.
a. True
b. False

Indicate the answer choice that best completes the statement or answers the question.
17. Which of the following industrial characteristics makes a collusion difficult but leads to competition?
a. Existence of few firms in the industry
b. Existence of an industry price leader
c. High barriers of entry
d. Lack of market commonality

Indicate whether the statement is true or false.

18. Patenting adds value to a firm’s resources when engaging with rivals.
a. True
b. False

19. The antitrust policies in the United States make it difficult for incumbents to raise entry barriers for new
entrants.
a. True
b. False

20. The Bretton Woods system had been built on the condition that the US inflation rate had to be continuously high.
a. True
b. False

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Name: Class: Date: Ver: 1

final exam T/f

Indicate the answer choice that best completes the statement or answers the question.
21. ____ centers on cooperating through joint ventures with MNEs and sell-offs to MNEs.
a. Dodger strategy
b. Extender strategy
c. Contender strategy
d. Defender strategy

Indicate whether the statement is true or false.

22. The strategic trade theory was mainly proposed for low capital-investment industries.
a. True
b. False

Indicate the answer choice that best completes the statement or answers the question.
23. If a firm is operating in an environment that is customized to home market, which of the following is the most
preferred strategy?
a. Dodger strategy
b. Extender strategy
c. Collusion strategy
d. Contender strategy

Indicate whether the statement is true or false.

24. The primary participants of the foreign exchange market are IMF and World Bank.
a. True
b. False

25. A weak dollar makes it more expensive for US tourists when traveling abroad.
a. True
b. False

Indicate the answer choice that best completes the statement or answers the question.
26. The theory of comparative advantage _____.
a. explains patterns of trade based on factor endowments
b. was the first theory to incorporate dynamic changes in patterns of trade
c. reduces the wealth of the nation in the short run
d. provides direct policy advice

Indicate whether the statement is true or false.

27. The American antitrust policy is pro-incumbent and pro-producer.
a. True
b. False

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final exam T/f

28. The theory of purchasing power parity suggests that in the absence of trade barriers, the price for identical
products sold in different countries will be different.
a. True
b. False

Indicate the answer choice that best completes the statement or answers the question.
29. Which combination of resource similarity and market commonality results in the least intense competition?
a. High resource similarity, high market commonality
b. Low resource similarity, high market commonality
c. Low resource similarity, low market commonality
d. High resource similarity, low market commonality

30. _____ are government payments to domestic firms.

a. Trade embargoes
b. Tariffs
c. Subsidies
d. Quotas

Indicate whether the statement is true or false.

31. A floating exchange rate allows each country to make its own monetary policy.
a. True
b. False

32. In the context of NTBs, administrative policies require a certain proportion of the value of the goods made in
one country to originate from that country.
a. True
b. False

33. Firms with strong patents can challenge rivals for infringements, making mutual forbearance impossible.
a. True
b. False

Indicate the answer choice that best completes the statement or answers the question.
34. The _____ theory viewed international trade as a zero-sum game.
a. comparative advantage
b. strategic trade
c. national competitive advantage of industries
d. mercantilism

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Name: Class: Date: Ver: 1

final exam T/f

Indicate whether the statement is true or false.

35. Blue ocean strategy focuses on attacking core markets defended by rivals.
a. True
b. False

Indicate the answer choice that best completes the statement or answers the question.
36. Which of the following is an advantage of a weak US dollar?
a. US consumers benefit from low prices on imports.
b. Foreign tourists enjoy lower prices in the US.
c. US tourists enjoy lower prices abroad.
d. Foreign firms find it harder to acquire US targets.

Indicate whether the statement is true or false.

37. The United States has the world’s oldest antitrust frameworks dating back to the 1890 Sherman Act.
a. True
b. False

Indicate the answer choice that best completes the statement or answers the question.
38. Which of the following is a modern trade theory?
a. Mercantilism
b. National competitive advantage
c. Comparative advantage
d. Absolute advantage

39. Which of the following is an advantage of a strong US dollar?

a. US importers will find it easier to compete with low-cost imports.
b. US exporters will find it easier to compete on price abroad.
c. US tourists will find it more expensive when traveling abroad.
d. US firms will experience less competitive pressure to keep prices low.

40. Dumping is defined as a(n) _____.

a. firm engaging its rival in multiple markets
b. company reducing prices after eliminating rivals
c. exporter selling below cost abroad
d. domestic company selling above cost

41. _____ are politically motivated trade sanctions against foreign countries to signal displeasure.
a. Antidumping duties
b. Trade embargoes
c. Subsidies
d. VERs
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Name: Class: Date: Ver: 1

final exam T/f

Indicate whether the statement is true or false.

42. Combining resource similarity and market commonality helps yield a framework of competitor analysis for any
pair of rivals.
a. True
b. False

Indicate the answer choice that best completes the statement or answers the question.
43. Which of the following is a theory that studies the interactions between two parties that compete and/or
cooperate with each other?
a. Game theory
b. Cross-market retaliation
c. Predatory pricing
d. Prisoner's dilemma

Indicate whether the statement is true or false.

44. Economist Adam Smith proposed the theory of comparative advantage.
a. True
b. False

45. The theory of absolute advantage is categorized as a classical theory of international trade.
a. True
b. False

Indicate the answer choice that best completes the statement or answers the question.
46. If globalization pressures for a firm are relatively low, and if the firm has skills and assets that are transferable
overseas, which of the following is the best strategy for the firm to use?
a. Contender strategy
b. Extender strategy
c. Dodger strategy
d. Defender strategy

Indicate whether the statement is true or false.

47. A country’s current account deficit can only be financed using its savings.
a. True
b. False

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Name: Class: Date: Ver: 1

final exam T/f

Indicate the answer choice that best completes the statement or answers the question.
48. Which of the following is true of the strategic trade theory?
a. It is the first theory to account for dynamic changes in trade patterns.
b. It explains patterns of trade based on factor endowments.
c. It advocates complete deregulation of international trade.
d. It provides direct policy advice.

49. _____ occurs when firms engage the same rivals in numerous markets.
a. Cross-border dumping
b. Explicit collusion
c. Cross-market retaliation
d. Multimarket competition

Indicate whether the statement is true or false.

50. In the context of NTBs, VERs are government payments to domestic firms.
a. True
b. False

Indicate the answer choice that best completes the statement or answers the question.
51. The _____ suggests the price for identical products in different countries would be the same, if trade barriers
are absent.
a. Bretton Woods system
b. theory of purchasing power parity
c. Penn effect
d. fixed exchange rate policy

52. In which of the following ways is the theory of comparative advantage linked to the Heckscher-Ohlin theory?
a. Dependency on a nation’s locally available abundant factors
b. Extent to which government influences international trade
c. Sustainability of wealth in the short run
d. Dynamic changes in the patterns of trade over time

Indicate whether the statement is true or false.

53. An appreciation is an increase in the value of the currency whereas a depreciation is a loss in the value of the
currency.
a. True
b. False

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Name: Class: Date: Ver: 1

final exam T/f

Indicate the answer choice that best completes the statement or answers the question.
54. Which combination of resource similarity and market commonality results in the most intense competition?
a. Low resource similarity, low market commonality
b. Low resource similarity, high market commonality
c. High resource similarity, high market commonality
d. High resource similarity, low market commonality

Indicate whether the statement is true or false.

55. Minimizing an opponent’s awareness, motivation, and capabilities is more likely to result in successful attacks.
a. True
b. False

Indicate the answer choice that best completes the statement or answers the question.
56. Mutual forbearance is a type of _____.
a. explicit collusion
b. cross-market retaliation
c. tacit collusion
d. multimarket competition

57. _____ is designed to combat monopolies and cartels.

a. Antitrust policy
b. Predatory pricing
c. Cross-market retaliation
d. Competition policy

58. The bandwagon effect is an example of the way _____ directly affects foreign exchange rates.
a. investor psychology
b. purchasing power parity
c. exchange rate policy
d. balance of payments

Indicate whether the statement is true or false.

59. Strategic hedging focuses on using forward contracts and swaps to contain currency risks.
a. True
b. False

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Name: Class: Date: Ver: 1

final exam T/f

Indicate the answer choice that best completes the statement or answers the question.
60. A high degree of _____ suggests that if a firm attacks in one market, its rivals may engage in cross-market
retaliation.
a. multimarket competition
b. explicit collusion
c. predatory pricing
d. market commonality

61. Laws that make it illegal for an exporter to sell goods below cost abroad with the intent to raise prices after
eliminating local rivals are called _____ laws.
a. collusion
b. antidumping
c. antitrust
d. anticartel

62. Which of the following industry characteristics contributes to collusion?

a. Low barriers to entry
b. Lack of market commonality
c. Existence of an industry price leader
d. Existence of many firms in the market

Indicate whether the statement is true or false.

63. Factor endowments is one of the four interacting aspects of the theory of national competitive
advantage of industries.
a. True
b. False

64. Currency hedging is a popular way to minimize the foreign exchange risk inherent in all non-spot transactions.
a. True
b. False

65. An industry with heterogeneous products, in which rivals are forced to compete on price, is likely to lead to
collusion.
a. True
b. False

66. Market commonality refers to the degree of similarity between two rival's products.
a. True
b. False

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Name: Class: Date: Ver: 1

final exam T/f

Indicate the answer choice that best completes the statement or answers the question.
67. The American antitrust policy is considered to be _____.
a. pro-producer
b. pro-consumer
c. pro-incumbent
d. pro-collusion

68. Which of the following is the funding source for the International Monetary Fund?
a. Currency trading
b. Subsidiary investing
c. Foreign direct investment
d. Member-country quota

69. The process of anticipating rivals’ actions in order to both revise a firm’s plan and prepare to deal with rivals’
response is called _____.
a. multimarket competition
b. mutual forbearance
c. competitor analysis
d. prisoners’ dilemma

70. Which of the following best describes a rate where selective government intervention works hand-in-hand,
allowing markets the freedom to work themselves out?
a. Target exchange rate
b. Free float rate
c. Fixed rate
d. Dirty float rate

Indicate whether the statement is true or false.

71. Basic economic theory suggests that the price of a commodity is most fundamentally determined by its supply
and demand.
a. True
b. False

72. The lowest intensity of rivalry between competitors is the result of high resource similarity and low market
commonality.
a. True
b. False

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Name: Class: Date: Ver: 1

final exam T/f

Indicate the answer choice that best completes the statement or answers the question.
73. The _____ principle advocated that governments should actively protect domestic industries from imports and
vigorously promote exports.
a. comparative advantage
b. factor endowment
c. protectionism
d. absolute advantage

Indicate whether the statement is true or false.

74. In the context of tariff barriers, net losses that occur in an economy as a result of tariffs are known as
deadweight costs.
a. True
b. False

75. Proponents of fixed exchange rates believe that market forces should take care of supply, demand, and price of
any currency.
a. True
b. False

76. Firms with a high degree of resource similarity are likely to have similar competitive actions.
a. True
b. False

77. The basic concept of protectionism and mercantilism is the same.

a. True
b. False

78. The foreign exchange markets are influenced only by economic factors and free from the effect of social or
political pressures.
a. True
b. False

Indicate the answer choice that best completes the statement or answers the question.
79. The _____ theory advocates government intervention in highly capital-intensive, high entry-barrier industries in
which domestic firms may have little chance without government assistance.
a. strategic trade
b. product life cycle
c. absolute advantage
d. laissez faire

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final exam T/f

Indicate whether the statement is true or false.

80. The infant industry argument demands lesser government intervention in international trade.
a. True
b. False

Indicate the answer choice that best completes the statement or answers the question.
81. The _____ theory is based on the assumption that the wealth of the world is fixed.
a. mercantilism
b. product life cycle
c. strategic trade
d. national competitive advantage of industries

82. Which of the following is true of the absolute advantage theory of international trade?
a. It emphasizes relative advantage in one economic activity that one nation enjoys in comparison with other
nations.
b. It divides the countries of the world into three categories based on innovation.
c. It advocates extensive government intervention in international trade.
d. It was the first theory that advocated free trade.

Indicate whether the statement is true or false.

83. Many countries with high inflation have pegged their currencies to the yuan in order to restrain domestic
inflation.
a. True
b. False

84. Subsidies are nontariff barriers.

a. True
b. False

Indicate the answer choice that best completes the statement or answers the question.
85. _____ are rules stipulating that a certain proportion of the value of the goods made in one country must
originate from that country.
a. Voluntary export restraints
b. Local content requirements
c. Import quotas
d. Trade embargoes

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final exam T/f

Indicate whether the statement is true or false.

86. Collusive price setting refers to price setting by monopolists or collusion parties at a level lower than the
competitive level.
a. True
b. False

Indicate the answer choice that best completes the statement or answers the question.
87. In the context of NTBs, _____ are bureaucratic rules that make it harder to import foreign goods.
a. deregulation policies
b. VERs
c. administrative policies
d. local content requirements

88. Which of the following resulted in the abandoning of the Bretton Woods system in the 1970s?
a. The United States was not running a trade deficit.
b. The dollar became inconvertible into gold.
c. The inflation rates in the United States and other developed counties were low.
d. Most countries wanted to return to the gold standard system.

Indicate whether the statement is true or false.

89. If one country’s interest rate is high relative to other countries, the country will attract foreign funds.
a. True
b. False

Indicate the answer choice that best completes the statement or answers the question.
90. The weight a member country carries within the IMF, which determines the amount of its financial contribution,
its capacity to borrow from the IMF, and its voting power is referred to as a(n) _____.
a. quota
b. balance of payment
c. accommodation
d. grant

Indicate whether the statement is true or false.

91. The rise of a country's productivity is usually accompanied by increased demand for its home currency.
a. True
b. False

92. By trying to be self-sufficient and producing a wide range of goods, mercantilist policies help sustain the wealth
of a nation in the long run.
a. True
b. False
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final exam T/f

93. In terms of international trade competitiveness, a strong dollar makes it easier for US firms to export and to
compete on price when combating imports.
a. True
b. False

Indicate the answer choice that best completes the statement or answers the question.
94. Import quotas are a type of _____.
a. antidumping duty
b. nontariff barrier
c. tariff barrier
d. voluntary export restraint

95. Which of the following is true of the bid rate in foreign exchange markets?
a. It is always higher than the offer rate.
b. It does not affect the spread of the exchange.
c. It is always equal to the offer rate.
d. It is always lower than the offer rate.

96. A price leader is a firm that ____ in the industry.

a. sets the globally consistent price
b. sets the lowest prices
c. sets the highest prices and has a low market share
d. sets acceptable prices and has a dominant market share

Indicate whether the statement is true or false.

97. The theory of mercantilism viewed international trade as a zero-sum game.
a. True
b. False

98. Strategic trade theory advocates mercantilist policy for all industries.
a. True
b. False

99. The International Trade Administration investigates antidumping cases in the United States.
a. True
b. False

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Name: Class: Date: Ver: 1

final exam T/f

Indicate the answer choice that best completes the statement or answers the question.
100. The post-Bretton Woods system is a system of flexible exchange rate regimes with _____.
a. no official common denominator
b. the American dollar as its common denominator
c. gold as its common denominator
d. the Japanese yen as its common denominator

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final exam T/f

Answer Key

1. d

2. c

3. b

4. False

5. a

6. d

7. False

8. True

9. b

10. False

11. a

12. c

13. True

14. d

15. True

16. True

17. d

18. True

19. True

20. False

21. a

22. False

23. a

24. False

25. True

26. a

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final exam T/f

27. False

28. False

29. b

30. c

31. True

32. False

33. False

34. d

35. False

36. b

37. True

38. b

39. b

40. c

41. b

42. True

43. a

44. False

45. True

46. b

47. False

48. d

49. d

50. False

51. b

52. a

53. True

54. d
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final exam T/f

55. True

56. c

57. a

58. a

59. False

60. d

61. b

62. c

63. True

64. True

65. False

66. False

67. b

68. d

69. c

70. d

71. True

72. False

73. c

74. True

75. False

76. True

77. True

78. False

79. a

80. False

81. a

82. d
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final exam T/f

83. False

84. True

85. b

86. False

87. c

88. b

89. True

90. a

91. True

92. False

93. False

94. b

95. d

96. d

97. True

98. False

99. True

100. a

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Scramble Map

Question # Original Question #

1 90
2 94
3 62
4 28
5 91
6 84
7 34
8 29
9 60
10 4
11 79
12 87
13 27
14 58
15 15
16 35
17 86
18 19
19 9
20 14
21 95
22 49
23 80
24 11
25 39
26 51
27 22
28 43
29 59
30 55
31 21
32 42
33 1
34 53
35 7
36 64
37 2
38 73
39 99
40 78
41 85
42 50
43 66
44 31
45 38
46 89
47 8
48 100
49 52
50 32

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51 93
52 76
53 33
54 98
55 46
56 74
57 71
58 77
59 17
60 96
61 57
62 56
63 26
64 23
65 45
66 37
67 81
68 63
69 70
70 82
71 44
72 30
73 61
74 40
75 41
76 25
77 47
78 13
79 97
80 10
81 54
82 75
83 36
84 3
85 68
86 24
87 72
88 83
89 12
90 65
91 6
92 48
93 20
94 67
95 88
96 69
97 18
98 16
99 5
100 92

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