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December 12, 2018 

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LAW OF COMPARATIVE ADVANTAGE: A basic principle that states every nation has a production activity that incurs a lower opportunity cost than that of another nation, which means that trade between the two nations can be beneficial to both if each specializes in the production of a good with lower relative opportunity cost. While this law is fundamental to the study of international trade, it also applies to other activities, especially the specialization and the division of labor.

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PLANT:

The physical capital (building and equipment) at a particular location used for the production of goods and services. A plant, or factory, is usually a relatively large production operation (compared with something smaller, like a shop). While plant and firm are occasionally used synonymously, a given firm might own more than one plant and a given plant might be owned by more than one firm.
A plant is essentially the geographic manifestation of large scale production, where the capital, workers, and materials are combined in the production of goods and services.

The term plant is occasionally used synonymously with other terms such as firm or business. However, to be precise, a firm or business is the organization set up to oversee production and a plant is the physical location of the production. The one term that is largely synonymous with plant is factory.

The distinction between the terms firm (or business) and plant (or factory) provides a couple of interesting combinations.

  • A given firm can operate several different plants. Consider The Wacky Willy Company, proud producer of Wacky Willy Stuffed Amigos (those adorable foam-filled tarantulas and scorpions). The Wacky Willy Company actually operates several plants for the production of Stuffed Amigos. They have a main assembly plant on the north edge of Shady Valley, just the up the highway from the shopping mall. Then they also have a fabric-cutting facility in Oak Town, thirty miles south of Shady Valley, a tag-printing plant in nearby Breezy Burg, and a stuffing poofer operation located in upstate Whispering Falls. The Wacky Willy Company is clearly a multi-plant firm. A single firm and four plants.

  • A single plant can be operated by more than one firm. Consider the wireless communications data relay equipment production facility located east of Shady Valley. This facility is used to assemble the assorted computers and communications equipment that enables high speed wireless telephone communication. This particular plant is owned and operated as a joint venture among Shady Valley's four wireless telephone services--OmniCell, Digital Distance, Tucker Trilateral Telephone, and FoneCom. In this case, there is one plant and four firms.

<= PLANNING HORIZONPLASTIC MONEY =>


Recommended Citation:

PLANT, AmosWEB Encyclonomic WEB*pedia, http://www.AmosWEB.com, AmosWEB LLC, 2000-2018. [Accessed: December 12, 2018].


Check Out These Related Terms...

     | firm | business | company | enterprise | legal business organizations | ownership liability | business objectives | profit maximization | natural selection | factory | industry |


Or For A Little Background...

     | capital | entrepreneurship | production | production cost | supply |


And For Further Study...

     | business sector | second estate | government enterprises | ownership and control | fixed investment |


Related Websites (Will Open in New Window)...

     | National Association of Manufacturers |


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