Chapter 7 Excercise Questions ISBN-13 : 978-0-618-9886-4 1) Does a firm make use
ID: 1098370 • Letter: C
Question
Chapter 7 Excercise Questions
ISBN-13 : 978-0-618-9886-4
1) Does a firm make use of comparative advantage in allocating its resources? What factors give a firm a comparative advantage?
2) Under what conditions are the two strategies of low cost and high quality a trade-off? Under what conditions would the efficient frontier not be an appropriate picture of the two strategies?
3) What is the best practices frontier? How does this relate to competitive advantage?
4) Why is growth a primary strategy of almost every firm? Would it ever make sense to "stand pat". Use the economic profit equation to provide an answer.
5) Jack Welch is heralded as a great leader of General Electric (GE). His strategy to acquire companies in different lines of business based on the requirement that each business in GE was to become the #1 or #2 competitor in the indistry is touted as being particulary brillant. While very successful, could there have been a fundemental flaw in Welch's strategy?
7) How is national strategy different firm firm strategy? How are the two the same?
Explanation / Answer
The theory of comparative advantage is perhaps the most important concept in international trade theory. It is also one of the most commonly misunderstood principles. There is a popular story told among economists that once when an economics skeptic asked Paul Samuelson (a Nobel laureate in economics) to provide a meaningful and nontrivial result from the economics discipline, Samuelson quickly responded,