Essentials of Economics
Essentials of Economics
4th Edition
ISBN: 9781464186653
Author: Paul Krugman, Robin Wells
Publisher: Worth Publishers
Question
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Chapter P9, Problem 1.1BC
To determine

Reason for profitability for Li & Fung.

Expert Solution & Answer
Check Mark

Explanation of Solution

It was profitable for Li & Fung to go beyond its brokering exports as it has absolute advantage in sourcing inputs from various suppliers across many nations. The company was able to allocate its resources where it could find profitable. Sometimes goods were produced using sophisticated technology or sometimes it is done in less advanced countries where labor is available in cheap.

Economics Concept Introduction

Concept Introduction:

Comparative advantage is an economic term in which a country produces a good in which it has least opportunity cost compared to another country.

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