Provide a 6 pages analysis while answering the following question: Economics of Multinational Enterprise. Prepare this assignment according to the guidelines found in the APA Style Guide. An abstract is required. Therefore any country will go for a good that is easy and cheap to produce making use of the locally abundant factor of production.
Most developed countries have abundant capital in their possession while the developing countries, on the other hand, are rich in labor. As for the Heckscher-Ohlin theory, the developing countries will opt to choose a good that will demand more labor that capital so as to utilize the natural advantage in hand. As a result, the country will produce what is best at and trade with another country in what it is not able to produce. An example is that a country like Kenya is one of the leading producers of Tea but it is not able to produce cars hence imports from China and Japan. Even when one of the countries is capable of producing both the goods than the other, the two will eventually end up benefiting from trade because if they have different natural advantages (Peng, 140). The output of a country that specializes will automatically increase and due to this, the profit generated will rise too.
For the part (b) of the question, a perfect competition is a market where no one has the power to influences the prices of the homogeneous products. Perfect competition conditions are usually strict and due to these characteristics, there are very few such markets. An imperfect competition is a market that does not have the characteristics or the conditions present in a perfect market. An oligopolistic is a market structure where there are few sellers. Some of the characteristics in this form of the market are. non-price competition, no free entry, ability to set prices, perfect knowledge and product differentiation. In an oligopolistic market, profit maximization is achieved by producing where the marginal revenue equals marginal cost. .