Answer to Question 1
Yes, under certain circumstances. Using the textbook example, suppose that Europeans are potentially more efficient at making commercial aircraft than Americans. Their potential can only be realized, however, after a period of experimentation and development. The initial problem they face is that the efficiency advantage goes to the United States because of its better developed linkages between suppliers and producers. The availability of existing planes at a cost that is lower than initial costs will be in the European industry may deter the development of the industry.
Answer to Question 2
C