Question

At what stage of the product life-cycle theory does production within other advanced countries begin to limit the potential for exports from the United States? Multiple Choice
a. when the U.S. firms set up production units in the advanced nations to meet rapidly growing demand
b. when the impact of differences in technology on productivity gets neutralized
c. when there is limited initial demand in the developing countries
d. when the demand in other advanced countries is limited to high-income groups
e. when the demand is starting to grow rapidly in the United States

Answer 1

Answer:

A. When the U.S. firms set up production units in the advanced nations to meet rapidly growing demand.

Explanation:

Production within other advanced countries begin to limit the potential for exports when the U.S. producers set up their production facilities in advanced nations to deal with high demands of certain products. When the markets reach a mature stage, the products and services become highly standardized and this is when the competition starts depending on the price.

Answer 2

Option A is correct.

According to the product life-cycle theory, the production within other advanced countries begins to limit the potential for exports from the United States because the U.S. firms set up production units in the advanced nations to meet rapidly growing demand.

Further Explanation:

Product life-cycle theory: Raymond Vernon gives it. It states that production location will shift internationally based upon the stage of the life cycle of the product.

The four stages of the product life cycle are:

• Introduction: In this stage, the introduction of the new product takes place in a developed country. The production is limited only to the developed country, and products are also exported to some developed nation.

• Growth: Due to the high demand for the product in other developed countries, the production facilities will be set up in these countries and export will decrease. The number of competitors will increase, and product and method of production will be standardized.

• Maturity: The demand for the product will stabilize in the developed countries, and the production will shift to developing countries. This production is shifted as the demand for the product is stabilized in the developed countries.

• Decline: In this stage, the product is majorly produced by the developing countries and exported to developed countries. The production technology has become absolute for the developed countries as a new product is introduced in the market.

Therefore, the other advanced countries begin to limit the export from the United States because the United States firm will set up production units in other advanced countries because the cost of exporting the product is more than the cost of producing the product. Since the demand for the product is high, the company will be able to earn high profits.

Learn more:

1. Competitive Advantage

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2. Demand and supply of goods

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3. Elasticity of demand

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Answer details:

Grade: Middle School

Subject: International Business

Chapter: International Trade Theory

 

Keywords: At what stage of the product life-cycle theory does production within other advanced countries begin to limit the potential for exports from the United States, when the U.S. firms set up production units in the advanced nations to meet rapidly growing demand, when the impact of differences in technology on productivity gets neutralized, when there is limited initial demand in the developing countries, when the demand in other advanced countries is limited to high-income groups, when the demand is starting to proliferate in the United States