Question

Germany is famous for auto engineering, which has made it an attractive country for car manufacturers. Italy would be of interest to firms with products in the leather industry, such as coats and shoes, because of Italy's historical supremacy in leather products. What consideration does this example relate to regarding a firm deciding on the location of production facilities for final products? a. A consideration in deciding upon production facility location for products relates to the product's image. b. Political considerations, such as social stability, the form of government, and public attitudes toward foreign investment, are all important in the location decision. c. Because only final products and services are sold to customers, and whereas components and raw materials are not, one consideration for deciding upon production facility location is proximity to markets. d. If a product can serve the needs of all customers around the world, then the company should locate production facilities in one country.

          Germany is famous for auto engineering, which has made it an attractive country for car manufacturers. Italy would be of interest to firms with products in the leather industry, such as coats and shoes, because of Italy's historical supremacy in leather products. What consideration does this example relate to regarding a firm deciding on the location of production facilities for final products?
 a. A consideration in deciding upon production facility location for products relates to the product's image. 
 b. Political considerations, such as social stability, the form of government, and public attitudes toward foreign investment, are all important in the location decision. 
 c. Because only final products and services are sold to customers, and whereas components and raw materials are not, one consideration for deciding upon production facility location is proximity to markets. 
 d. If a product can serve the needs of all customers around the world, then the company should locate production facilities in one country.

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Principles of Economics

Gregory Mankiw 8th Edition

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Solved by Expert Crystal Wang

10/05/2023

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This means that the location of production facilities should align with the image and reputation of the product. For example, Germany's reputation for auto engineering makes it an attractive location for car manufacturers. Show more…

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Germany is famous for auto engineering, which has made it an attractive country for car manufacturers. Italy would be of interest to firms with products in the leather industry, such as coats and shoes, because of Italy's historical supremacy in leather products. What consideration does this example relate to regarding a firm deciding on the location of production facilities for final products? a. A consideration in deciding upon production facility location for products relates to the product's image. b. Political considerations, such as social stability, the form of government, and public attitudes toward foreign investment, are all important in the location decision. c. Because only final products and services are sold to customers, and whereas components and raw materials are not, one consideration for deciding upon production facility location is proximity to markets. d. If a product can serve the needs of all customers around the world, then the company should locate production facilities in one country.

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Transcript

00:01 Country a and b are producers of cars and computers.

00:04 In country a, it takes 20 minutes to produce a car and 20 minutes to produce a computer.

00:19 In country b, it takes 40 minutes to produce a car and 10 minutes to produce a computer.

00:30 Which country has absolute advantage in producing each good? so who can produce this with the least amount of time? so we could see that a has the absolute advantage in cars.

00:43 It could produce it in 20 minutes versus 40.

00:46 B has absolute advantage in computers.

00:49 It could produce it in 10 minutes versus 20.

01:02 What are the opportunity costs to produce the goods in each country? and which has the comparative advantage? so for a, it takes 20 minutes to either make a car or computer.

01:22 So the opportunity cost of one car or one computer is one car.

01:28 To produce one computer, we need to give up the time that we could use to produce one car.

01:36 So the opportunity cost is one car.

01:39 For b, it takes 40 minutes to produce a car.

01:45 It takes 10 minutes to produce a computer.

01:47 So in the time it takes to produce one car, we can make four computers.

02:04 So the opportunity cost to produce one computer is 0 .25 cars.

02:09 To produce one car, we have to give up four computers.

02:27 So who has comparative advantage? so who can produce at the lowest opportunity cost? so to produce one computer, we give up 0 .25 cars versus one car.

02:42 So b has comparative advantage in computers.

02:46 It could produce it at the lower opportunity cost.

02:50 It gives up less cars to produce.

02:53 So to get one car, we give up four computers in b and one computer in a.

03:01 So a gives up less computers to produce the car.

03:04 So it's comparative advantage in car for a...

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