Which trade theory contends that a country that initially develops and exports a new product may eventually become an importer of it and may no longer manufacture the product ?
Correct answer: D. Product life cycle theory
- A. Theory of factor endowments
- B. Theory of overlapping demands
- C. Economies of scale theory
- D. Product life cycle theory
Explanation
Product life cycle theory explains how a country may first export an innovation, but later import it when production becomes standardized and shifts to lower-cost countries. The pattern can therefore move from export to import.
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