Today few, if any, countries are economically selfsufficient. Even China, with its vast human and natural resources, has not been able to remain aloof from the world economy. In the United States, international business touches people’s lives daily. Common goods and services such as Shell gasoline stations, often identified with the United States, are, in fact, foreign owned. International business is business conducted in more than one country, including buying and selling goods and services. Other international business activities include marketing, manufacturing, mining, and farming. In sum, international business is all the practices a business in a single country does, but at the international level.
Who introduced the theory of comparative advantage? Which theory makes more sense, absolute advantage or comparative advantage? Give a typical example to illustrate the comparative advantage of a particular country.
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The theory of comparative advantage was introduced by the English eonomist Daivd Richard. (2分)As compared with that of absolute advantage, the theory of comparative advantage makes more sense. (2分)Switzerland’s comparative advantage in watch making is a typical example. (3分)
Why is controlling costs a first major motivation for firms to undertake FDI?
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Controlling costs is the first major motivation for firms to undertake FDI because all the firms want to lower their production costs. (2分)A foreign contry may have lower land prices, tax rates or cost of labor, all of which will reduce the production costs to a considerable degree, making foreign locations more attracive. (3分)And to save fees for long distance transportation is also an improtant consideration for an enterprise to engage in FDI. (3分)