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Questions and Answers
What is considered an integrating force that encourages innovation in firms within an industry?
What is considered an integrating force that encourages innovation in firms within an industry?
Globalization has led to less intense competition between regions and cities over market shares.
Globalization has led to less intense competition between regions and cities over market shares.
False (B)
What model is associated with regional competitiveness in the writings of key academics?
What model is associated with regional competitiveness in the writings of key academics?
Porter's cluster model
The competitive advantage diamond focuses on firm-level forces in trade among ____ countries.
The competitive advantage diamond focuses on firm-level forces in trade among ____ countries.
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Match the following concepts with their descriptions:
Match the following concepts with their descriptions:
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Which country has an absolute advantage in the production of oil?
Which country has an absolute advantage in the production of oil?
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Libya has a comparative advantage in the production of corn.
Libya has a comparative advantage in the production of corn.
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What is the opportunity cost of producing one pound of beef in Brazil?
What is the opportunity cost of producing one pound of beef in Brazil?
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_______ has an absolute advantage in the production of both sweaters and wine.
_______ has an absolute advantage in the production of both sweaters and wine.
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Match the following countries with their respective advantages in production:
Match the following countries with their respective advantages in production:
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Which country has a comparative advantage in producing autos?
Which country has a comparative advantage in producing autos?
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Nigeria has a comparative advantage in the production of oil compared to Libya.
Nigeria has a comparative advantage in the production of oil compared to Libya.
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Who has the absolute advantage in the production of wine?
Who has the absolute advantage in the production of wine?
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The United States has a comparative advantage in producing both autos and beef.
The United States has a comparative advantage in producing both autos and beef.
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What does the law of comparative advantage state?
What does the law of comparative advantage state?
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Brazil has a comparative advantage in producing beef because it uses relatively abundant resources more ______.
Brazil has a comparative advantage in producing beef because it uses relatively abundant resources more ______.
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Which of the following is NOT a factor influencing comparative advantage?
Which of the following is NOT a factor influencing comparative advantage?
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Match the factors influencing comparative advantage to their descriptions:
Match the factors influencing comparative advantage to their descriptions:
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Technological superiority can lower production costs and provide a comparative advantage.
Technological superiority can lower production costs and provide a comparative advantage.
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How can international policies contribute to a region's comparative advantage?
How can international policies contribute to a region's comparative advantage?
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Which of the following best describes comparative advantage?
Which of the following best describes comparative advantage?
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Comparative advantage and absolute advantage refer to the same concept.
Comparative advantage and absolute advantage refer to the same concept.
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Who developed the concept of comparative advantage?
Who developed the concept of comparative advantage?
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Comparative advantage gives a region the ability to sell goods and services at a lower _______.
Comparative advantage gives a region the ability to sell goods and services at a lower _______.
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Match the following terms with their definitions:
Match the following terms with their definitions:
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What is the opportunity cost of an economic decision?
What is the opportunity cost of an economic decision?
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Saudi Arabia has an absolute advantage in the production of both oil and corn.
Saudi Arabia has an absolute advantage in the production of both oil and corn.
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Which of the following best defines competitive advantage?
Which of the following best defines competitive advantage?
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In the provided example, how many hours does it take for the U.S. to produce one bushel of corn?
In the provided example, how many hours does it take for the U.S. to produce one bushel of corn?
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Competitiveness in the global economy is solely about having the lowest prices.
Competitiveness in the global economy is solely about having the lowest prices.
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What aspect of demand conditions is important for competitiveness?
What aspect of demand conditions is important for competitiveness?
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Factors influencing competitive advantage include factor conditions, ______, related and supporting industries.
Factors influencing competitive advantage include factor conditions, ______, related and supporting industries.
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Match the factors influencing competitive advantage with their descriptions:
Match the factors influencing competitive advantage with their descriptions:
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What role do related and supporting industries play in competitive advantage?
What role do related and supporting industries play in competitive advantage?
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A nation's competitiveness is independent of its industry’s ability to innovate.
A nation's competitiveness is independent of its industry’s ability to innovate.
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Name one factor that does not refer to conventional resources in competitive advantage.
Name one factor that does not refer to conventional resources in competitive advantage.
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Study Notes
Introduction to Regional Economic Development
- Regional economic development relies on spatial interaction between regions.
- This interaction involves the movement of goods, services and people.
- International trade theory explores patterns and characteristics of trade between nations.
- This theory focuses on comparative and competitive advantage.
Comparative Advantage
- David Ricardo introduced the concept in the 19th century.
- It describes the ability of an economy to produce goods and services at a lower opportunity cost than competitors.
- This lower opportunity cost leads to a competitive advantage for a company or region, allowing them to sell goods at a lower price and increase sales.
- Comparative advantage is often confused with absolute advantage, but they are different.
Comparative Advantage (continued)
- Absolute advantage refers to the ability of a country or region to produce a good or service at a lower cost per unit.
- However, comparative advantage is about the ability to produce goods or services at a lower opportunity cost, not necessarily a lower absolute cost.
- Opportunity cost refers to the benefits that are lost when choosing one alternative over another.
Examples of Comparative Advantage
- Saudi Arabia has an absolute advantage in oil production because it takes fewer hours (4) to produce a barrel of oil compared to the United States (7 hours).
- The United States has an absolute advantage in corn production because it takes fewer hours (1) to produce a bushel of corn compared to Saudi Arabia (4 hours).
- Comparative advantage considers the opportunity cost. For example, if Libya uses 100 worker hours to make 100 barrels of oil or 25 bushels of corn, it has a comparative advantage in oil.
Factors Influencing Comparative Advantage
- Resource Endowments: A country has a comparative advantage in producing goods that use its abundant resources. Examples are abundant natural resources, skilled labor,etc
- Demand Patterns: High demand in both domestic and international markets is crucial for gaining a comparative advantage.
- National/International Policies: Policies related to infrastructure, export promotion, education, and R&D are important. Policies from organizations like IMF and WTO can be beneficial or detrimental to industries in certain regions.
- Technological Superiority: Advanced technology allows efficient quality production for a region, improving its comparative advantage. Economies of scale lower production costs in such regions.
Competitive Advantage
- There's no single definition for competitive advantage.
- One definition links competitive advantage to more competitive markets (lower barriers to entry, more firms)
- Another definition describes competitiveness as involving low prices compared to rivals, a strong drive to win, or high demand and superior quality.
- A nation's competitiveness depends on its capacity for industry innovation and upgrading.
Factors Influencing Competitive Advantage
- Factor Conditions: These are factors like labor and capital, but in a specialized and upgraded variant, rather than traditional resources. Examples include highly skilled labor, world-class scientific research, and specialized infrastructure.
- Demand Conditions: The character and nature of demand within a home market is important more than the mere size of that market. Sophisticated and demanding consumers help drive innovation.
- Related and Supporting Industries: Industries that support each other are important. Internationally competitive related industries fostering innovation are advantageous.
- Firm Strategy, Structure, and Rivalry: The competitiveness of firms within an industry is critical. This includes domestic rivalry that drives innovation.
Linking Comparative and Competitive Advantage
- For intra-industry trade among developed countries, firm-level forces dominate.
- In trade between developed and developing/resource-rich countries, country-level forces (comparative advantage) are stronger.
Importance of Regional Competitiveness
- Globalisation has driven increased competition between enterprises, nations, and regions.
- Knowledge of measuring and enhancing local competitiveness grows, resulting in indexes and league tables.
- Economic policies and academic research promote the concept of regional competitiveness.
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Description
This quiz explores the key concepts of regional economic development, including spatial interactions and the movement of goods, services, and people. It delves into international trade theory, focusing on the principles of comparative and competitive advantage introduced by David Ricardo. Understand how these economic concepts impact trade and regional competitiveness.
