Please answer the following:Explain the importance of absolute and comparative advantage? What is the relevance of the product life cycle theory in doing international business?

Absolute advantage >> absolute advantage refer to superior ability to produce high volume ,…

Answered: Explain the importance of absolute and…

International Financial Management

14th Edition

ISBN:9780357130698

Author:Madura

Publisher:Madura

Chapter1: Multinational Financial Management: An Overview

Section: Chapter Questions

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Explain the importance of absolute and comparative advantage?
What is the relevance of the product life cycle theory in doing international business?

Definition Video Definition Ability of a country to produce goods and services at a lower opportunity cost compared to other countries. Here, opportunity cost refers to the forgone units of one good in order to produce one more unit of another good. For example, the opportunity cost of producing good X in country A is 2Y and in country B is 1.25Y. Country B has a lower opportunity cost of producing good X than country A. Therefore, country B has a comparative advantage in the production of good X. Video

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