Learning Objectives And Definitions From Chapter 5 Of Global Business Today, 7Th Ed.

Front 1

Free Trade

Back 1

the absence of government barriers to the free flow of goods and services between countries.

Front 2

Understand why nations trade with each other

Back 2

International trade allows a country to specialize in the manufacturing and export of products that can be produced most efficiently in that country, while importing products that can be produced more efficiently in other countries.

Front 3

New Trade Theory

Back 3

Theory that sometimes countries specialize in the production and export of particular products not because of underlying differences, but because in certain industries the world market can support only a limited number of firms

Front 4

Summarize the different theories explaining trade flows between nations

Back 4

Mercantilism: An economic philosophy advocating that countries should simultaneously encourage exports and discourage imports
Zero-Sum Game: A situation in which an economic gain by one country results in an economic loss by another.
Absolute Advantage: When a country is more efficient than any other country in producing a good
Comparative Advantage: When a country is more efficient than another in producing a good

Front 5

Recognize why many economist believe that unrestricted free trade between nations will raise the economic welfare of countries that participate in a free trade system

Back 5

Ricardo's theory states that potential world production is greater with unrestricted free trade. His theory of comparative advantage suggests that trade is a positive-sum game in which all countries that participate realize economic gain.

Front 6

Constant Returns to Specialization

Back 6

The units of resources required to produce a good are assumed to remain constant no matter where one is on a country's production possibility frontier

Front 7

The Product Life Cycle

Back 7

The product-life cycle theory suggests that trade patterns are influenced by where a new product is introduced. In an increasingly integrated global economy, the product life-cycle theory seems to be less predictive than it once was.

Front 8

Economies of Scale

Back 8

Cost advantages associated with large-scale production

Front 9

First-mover Advantages

Back 9

Advantages accruing to the first to enter a market

Front 10

Understand the important implications that international trade theory holds for business practice

Back 10

1. Location: Different countries have particular advantages in different productive activities
2. First-Mover Implications: A first mover advantage with regard to production may subsequently dominate global trade in that product
3. Policy implications: Businesses can exert a strong influence on government trade policy, lobbying to promote free trade or trade restrictions.