What are the differences between absolute advantage and comparative advantage? Absolute advantage and comparative advantage are two basic concepts to international trade and perhaps two most important concepts in international trade theory. Under absolute advantage‚ one country can produce more output per unit of productive input than another. With comparative advantage‚ if one country has an absolute (dis)advantage in every type of output‚ the other might benefit from specializing in and exporting
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the economy‚ i.e.‚ manufacturing corporations that reinvest their profits abroad and avoid taxation in the USA. QUESTION 2: Explain how trade lowers the costs of making computer peripherals such as mice and keyboards. As the International trade theory suggests‚ the lower prices of computers resulting from outsourcing leads to the prediction that the average American consumer could consume more goods and services. In my opinion‚ that is exactly what happened – products are cheaper which means more
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In a world without trade‚ what would American consumers have to pay for Logitech’s products? The costs American consumers would have to pay for Logitech products would increase significantly in a world without trade. This is due to the face that production‚ assembly‚ resources‚ and sale of their products would all have to be conducted in the US. Logitech would no longer be able to rely on China for cheap labor and assembly‚ or Taiwan for efficient and cheap manufacturing. Therefore these increased
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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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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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the start of the company‚ Logitech Inc. became one of the top corporate giants in the computer mouse/pointing device market with big rivals such as Microsoft and KYE. Founded on October 2‚ 1981 by Pierluigi Zappacosta and Daniel Borel in Switzerland‚ Logitech was initially in the business of developing software‚ which soon extended to hardware after winning large contracts with Ricoh and Swiss Timing. In 1982‚ less than 6 months since the company was founded‚ Logitech quickly secured the rights
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Marketing Mix In order to market our product we will be focusing on the Product Strategy‚ Price Strategy‚ Place Strategy and Promotion Strategy. Product: The product is an innovation of the existing gaming mouse and has the following product levels: 1. Core Benefit – The main purpose of introducing this product is to act as a pointing device to enhance Graphic User Interface. 2. Actual Product – This product features a finger print scanner‚ mini projector‚ heat sensor‚ surface
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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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Final Exam Practice Questions Multiple Choice Identify the choice that best completes the statement or answers the question. ____ 1. Assume that Greece has a comparative advantage in fish and Germany has a comparative advantage in cars. Also assume that Germany has an absolute advantage in both fish and cars. If these two countries specialize and trade so as to maximize the benefits of specialization and trade‚ then |a. |the two countries’ combined output of both goods will be higher than
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The Absolute Advantage concept is generally attributed to Adam Smith for his 1776 publication An Inquiry into the Nature and Causes of the Wealth of Nations in which he countered mercantilist ideas. Adam Smith argued that it was impossible for all nations to become rich at the same time by following mercantilism because the export of one nation is another nation’s import and instead stated that all nations would gain simultaneously if they practiced free trade and specialized in accordance with their
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