Answer to Question 1
While the concepts of absolute advantage and comparative advantage provide the rationale for international trade, these early trade theories fail to account for factors that make contemporary trade complex, including the following:
Traded products are not just commodities anymore; many traded goods are characterized by strong branding and differentiated features.
International transportation is often costly.
Government restrictions such as tariffs (taxes on imports), import barriers, and regulations can hamper international trade.
Large-scale production in certain industries may bring about scale economies, and therefore lower prices.
Many services, such as banking and retailing, cannot be traded in the usual sense and must be internationalized via foreign direct investment.
Modern telecommunications and the Internet facilitate global trade in many services at very low cost.
Many firms are highly entrepreneurial and innovative or have access to exceptional human talent that they employ to develop superior business strategies.
Despite the scarcity of financial, human, and tangible resources that characterize most new businesses, born global firms internationalize early in their evolution. Among the reasons are the growing intensity of international competition, the integration of world economies under globalization, and advances in communication and transportation technologies that reduce the cost of venturing abroad and make it easier to internationalize earlier and faster than ever before. The born global phenomenon has given rise to a new field of scholarly inquiry, international entrepreneurshi
Answer to Question 2
b
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