1. Economist Lester Thurow once posed the following question: “If you were the president of your own country and could specialize in one of two industries, computer chips or potato chips, which would you choose?” When faced with this question, many people choose potato chips, because “everybody can use potato chips, but not everybody can use computer chips.” But the answer is much more complex. Whether to choose computer chips or potato chips depends on such factors as the relationship between national wealth and the amount of value added in manufacturing products; whether the country can benefit from monopoly power (few countries can make computer chips); and the likelihood of spin-off industries (computer chip technology gives rise to other technologies, such as computers). In light of these and other possible considerations, which would you choose: computer chips or potato chips? Justify your answer on the basis of comparative and competitive advantages.

2. TelComm Corporation is a manufacturer of components for the cell phone industry. TelComm founder Alex Bell heard that China has the world’s largest number of cell phone users and wants to begin exporting the firm’s products there, but TelComm has little international experience. Mr. Bell is unaware of the various types of nontariff trade barriers that TelComm might face in China and other foreign markets. Summarize major nontariff trade barriers to Mr. Bell. What types of investment barriers might TelComm face in the event management decides to establish a factory in China to manufacture cell phone components? What can TelComm management do to minimize the threat of these nontariff trade and investment barriers? Describe various company strategies to manage government intervention.