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Chapter 19: Q 14. (page 462)

What is splitting up the value chain?

Short Answer

Expert verified

A value chain is a business model that describes the full range of activities needed to create a product or service.

Step by step solution

01

Step 1. Definition

The chain of adding value to inputs or to the chain of turning imputs into outputs is known as value chain

02

Step 2. Explanation

When different stages of producing a good take place in different countries around the world it is referred to as splitting up the value chain. Take an example like mobile phone to have various different parts. Splitting up the value chain here means that the firms specialize in producing some particular parts in place of producing all the parts.

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Most popular questions from this chapter

In World Trade Organization meetings, what do

you think low-income countries lobby for?

In Japan, one worker can make 5 tons of rubber or 80 radios. In Malaysia, one worker can make 10 tons of rubber or 40 radios.

a. Who has the absolute advantage in the production of rubber or radios? How can you tell?

b. Calculate the opportunity cost of producing 80 additional radios in Japan and in Malaysia. (Your calculation may involve fractions, which is fine.) Which country has a comparative advantage in the production of radios?

c. Calculate the opportunity cost of producing 10 additional tons of rubber in Japan and in Malaysia. Which country has a comparative advantage in producing rubber?

d. In this example, does each country have an absolute advantage and a comparative advantage in the same good?

e. In what product should Japan specialize? In what product should Malaysia specialize?

In France it takes one worker to produce one sweater, and one worker to produce one bottle of wine. In Tunisia it takes two workers to produce one sweater, and three workers to produce one bottle of wine. Who has the absolute advantage in production of sweaters? Who has the absolute advantage in the production of wine? How can you tell?

Why does the United States not have an absolute

advantage in coffee?

How does comparative advantage lead to gains

from trade?
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