Question

According to the new trade theory, firms that establish a first-mover advantage with regard to the production of a particular new product may subsequently dominate global trade in that product.

a. True

b. False

Answer 1

This is a tricky one. The New Trade Theory does not mention "first movers advantage" directly. It says that a strong predictor of success is the ability to reach economies of scale and substantial networking.

What makes this tricky is that "first movers advantage" can lead to both of these things. If someone is first in the market, they have the possibility to build up capacity to reach economies of scale faster than anyone else.

This is a tricky question, but I would lean towards false because it's not ALWAYS the first mover that reaches economies of scale FIRST!