MBA 525 ~ Practice with comparative advantage and gains from trade. The principle of comparative advantage states that if nations (or individuals) specialize in the production of goods and services that they can produce at lower opportunity cost relative to other nations‚ then there can be mutual gains from trade. As a result‚ there will be more efficient production and consumption. Applying the efficiency principle‚ this means that mutually beneficial trade allows each nation to consume a mix
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My comparative advantage in the labor market is as a Senior Administrative Assistant. The understanding of the duties of a Senior Administrative Assistant is often misunderstood to be a non-specialized occupation that doesn’t require any expertise. Presently‚ the administrative assistant job market is changing drastically due to employment trends which require a broadening and expanding of the functions and obligations of an administrative assistant. “Because of new technology‚ the administrative
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An example of absolute advantage: An African mining company in Lagos Nigeria is the only mine where this particular diamond is found. The African mining company ships this diamond to diamond jewelry companies all over the world. Other countries would not have this diamond if the Nigerian mining company did not mine and ship it to them. An example of comparative advantage: A Japanese company will manufactures audio and video machines below labor price and cost. They don’t have to manufacture
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1- Describe Adam Smith’s concept of absolute advantage and David Ricardo’s concept of Comparative Advantages. Are those concepts still useful in the 21st century’s Business environment? The concept of absolute advantage is the ability of a country to use less resources (inputs) to produce goods/products than any other country. For Smith‚ a country should specialize in the production of the product for which it has an absolute advantage and should buy at lower price others goods from other countries
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the idea of comparative advantage provide a good explanation of current patterns of international trade? For the last two centuries the international trade evolved a lot and many economists tried to explain it. One of the first theories that attempted to explain the international trade pattern was the Absolute advantage theory. A.Smith was a great economist; he is the one who created this theory. For A. Smith countries should specialize in products in which they have an absolute advantage. It was a
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What is the difference between competitive advantage and comparative advantage? Answer: An advantage that a firm has over its competitors‚ that differentiates the Product or services offered by the firm and allows the firm to reduce it’s Cost or generate Higher Revenue or Margin is known as Competitive Advantage. A competitive advantage is something that a consumer views in a product or service as having higher value than the other competitors of the firm in the industry. It is an expertise that
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Theory of Absolute Cost Advantage MERCANTILISTS’ VERSION Mercantilism stretched over nearly three centuries‚ ending in the last quarter of the eighteenth century. It was the period when the nation-states were consolidating in Europe. For the purpose of consolidation‚ they required gold that could best be accumulated through trade surplus. In order to achieved trade surplus‚ their governments monopolized trade activities‚ provided subsidies and other incentives for export‚ and restricted imports
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Theory of Comparative Advantage Historically‚ nations have been trading with each other for hundreds of years for profit or because they do not have enough resources (land‚ labor and capital) to satisfy all the needs of consumers. For example‚ Japan has a highly skilled labor force that use technologically advanced equipment to produce cars and electrical equipment; however it does not have its own oil fields. Saudi Arabia has large supplies of oil‚ but lacks the built capital to produce cars
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with less developed countries where these goods are produced for a higher price. This is striking but this comes out from the theory of “relative advantage”. The absolute advantage is the fact that one country (named A) is more efficient and productive than another country (named B) in the production of all goods. It is said that A has an absolute advantage on B. When these two countries have different relative efficiencies‚ they can make profit from trading with each other. For instance‚ if B can
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of comparative advantage: The theory provides a basis for explaining and justifying international trade in a model world assumed to enjoy free trade‚ perfect competition‚ no uncertainty‚ costless information‚ and no government interference. 5. Limitations of comparative advantage: a. Countries do not appear to specialize only on those products that could be most efficiently produced by that country’s particular factors of production. b. Governments interfere with comparative advantage for
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