Final answer:
The statement is false; firms must respect intellectual property laws regardless of whether they make components in-house. Comparative advantage arises from various factors, not just natural elements. The value of intellectual property in technology can significantly outweigh the value of physical materials.
Step-by-step explanation:
The statement 'A major advantage of making components and raw materials in-house is that the firm is not required to honor protections of intellectual property.' is False. Even when a firm produces components and raw materials in-house, it must respect intellectual property (IP) laws. IP laws are designed to protect the creation of ideas, inventions, and designs, ensuring that innovative firms can recover investments made in research and development. Not adhering to IP protections could result in legal repercussions regardless of where the components are made or by whom.
Moreover, factors contributing to a firm's comparative advantage are not limited to natural elements like climate and mineral deposits. A variety of factors, including the education level of workers, the knowledge base of engineers and scientists, the specialized segments of the value chain, economies of scale, and more can endow a comparative advantage. This diversified basis for comparative advantage allows companies to thrive even without specific local resources.
Finally, competition and consumer demand drive innovation and efficiency, leading to better and often less expensive products. The value of technology in a product often far surpasses the value of its physical materials, which is to say that the intellectual property associated with technological advancement is a crucial part of a product's overall value.