Instruction: These are essay-type questions. Choose any two (2) questions out of six (minimum two typed pages per question, 20% each).
1. Summarize the mercantilists’ main arguments for a favorable trade balance. Why did mercantilism advocate the accumulation of gold?
2. Summarize Adam Smith’s main arguments for a favorable trade balance. Explain clearly the principle of ‘absolute advantage’.
3. Summarize David Ricardo’s main arguments for a favorable trade balance. Explain clearly the principle of ‘comparative advantage’.
4. What are some of the assumptions on which the Heckscher-Ohlin theory of trade is based? What does this theory say about the trade choices of different countries as well as the effect of trade on factor prices? How does the Leontief paradox challenge the overall applicability of the factor-endowment model?
5. Summarize Raymond Vernon’s ‘product life cycle theory’. Summarize Krugman and Lancaster’s ‘global strategic rivalry theory’. Utilize a product of your choice to offer support to Vernon’s trade theory.
6. Summarize Michael Porter’s ‘national competitive advantage theory’. Describe how a business may use the trade theories to develop its business strategies.
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