Homework Clinic
Social Science Clinic => Business => Management => Topic started by: frankwu on Jul 7, 2018
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Which of the following is an example of global sourcing?
A) After the recent global recession, major banks in Palladia were funded more quickly under national ownership and control.
B) Titania, a country with a major stake in automobile manufacturing, employs citizens to keep its level of quality and commitment to the automobile industry.
C) Camden Ltd., a Berylia-based pharmaceutical company has opened manufacturing centers in Rhodia.
D) To manage the steel industry in Cadmia, over 900 coal mines were taken under public ownership.
Question 2
In a short essay, explain the absolute advantage principle. Provide an example of the principle at work.
What will be an ideal response?
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Answer to Question 1
C
Answer to Question 2
Smith's absolute advantage principle states that a country benefits by producing primarily those products in which it has an absolute advantage-those that it can produce using fewer resources than any other country. Each country can increase its wealth by specializing in the production of goods in which it has unique advantages, exporting those goods, and then importing other goods in which it has no particular advantage. If every nation follows this practice, each can consume more than it otherwise could, generally at lower cost.
A modern example of the principle at work involves the nations of Japan and Saudi Arabia. Japan has no natural holdings of oil, but it manufactures some of the best automobiles in the world. On the other hand, Saudi Arabia produces much oil, but it lacks a substantial car industry. Given the state of their resources, it would be wasteful for each of these countries to attempt to produce both oil and cars. By trading with each other, Japan and Saudi Arabia each employs its respective resources efficiently in a mutually beneficial relationshi
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thanks