Question

Give 2 reasons why the theory of comparative advantage is not fully applicable

Name 3 advantages Boeing gains by globalizing and being a Multinational Enterprise.

Answer 1

2 reasons why theory of comparative advantage is not fully applicable

1. It does not take into account transport cost . The cost of transporting goods between the countries might reduce the cost advantage substantially.
2. Absence of free trade. Import and export duties and other tariffs , will increase the costs and reduce the comparative advantage.

3 advantages Boeing gains by globaliing and being a multinational enterprise:

1. Access to new markets and more customers will increase sales and profits.
2. Access to cheaper labor in some countries will reduce production costs and increase profits.
3. Taxes may be less in some countries and this will increase the after tax earnings .