Explain the Value Chain and How It Can Be Used

question 46

Essay

Explain the value chain and how it can be used to help firms develop competitive advantages.

Explain the role of purchasing power parity in comparing economies.

Understand the basic concepts and advantages of different capital investment analysis methods.

Calculate and interpret the average rate of return for an investment.

Identify and distinguish between present value methods and methods that ignore present value in capital investment analysis.

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Definitions:

Economies Of Scale

Cost advantages reaped by companies when production becomes efficient, as the scale of operation increases, leading to a reduction in average cost per unit.

Specialization

The focus of a business or individual on a limited scope of products or skills, allowing for increased efficiency and expertise.

Total Cost Curve

A graphical representation showing the total cost associated with producing varying quantities of output, illustrating economies or diseconomies of scale.

Short Run

A time frame in economics during which at least one factor of production is fixed, limiting the ability of the economy or a firm to adjust to changes.