Questions

1 Explain the theory of comparative advantage as a motive for foreign trade. What is the logic behind this theory?

2 The theory of the product life cycle is used as a motive for foreign trade as well as a motive for foreign investment. Discuss this theory as a motive for both foreign trade and foreign investment.

3 What are economies of scale?

4 Describe reasons for trade protectionism.

5 Assume that world leaders attempt to reduce or eliminate artificial barriers to trade through many forms of economic integration. Describe the different types of economic cooperation.

6 What are the major functions of the World Trade Organization?

7 What are the major benefits of market integration?

8 Why do many companies diversify their operations internationally when there are many opportunities for domestic diversification?

9 Explain the oligopoly model as a motive for foreign direct investment.

10 Lee Nehrt and Dickerson Hogue suggested that companies invest abroad for new markets, raw materials, production efficiency, and new knowledge. Discuss each of these four motives for foreign investment.

11 What is the eclectic theory?

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