Final answer:
Measuring competitive advantage by the economic value created for a firm's products and services is important because it encapsulates how much a firm's offering surpasses production costs, indicating its market position and ability to sustain profits.
Step-by-step explanation:
The assertion that it is important to measure competitive advantage at the firm-level by looking at the economic value created for all products and services offered by the firm is true. The economic value created can be considered a measure of a firm's competitive advantage because it captures the difference between the perceived value of a product or service and the cost to produce it. This concept is central to understanding how firms achieve and sustain their competitive positions in the market.
Competitive advantage arises from various attributes, such as the ability to offer lower prices due to large-scale production, innovation in products and services, proprietary technology, better customer service, or more effective branding. Large-scale production can dramatically lower average costs and increase profitability if the savings are passed on to consumers, making the company's products more attractive compared to its competitors. However, if the market is not perfectly competitive, which is most often the case, the economic value created also reflects the firm's market power and ability to extract consumer surplus.
Furthermore, a firm's overall competitive advantage can contribute to national economic advantages, similar to comparative advantage in international trade. Factors like worker's education, technological advances, economies of scale, and knowledge transfer in the value chain can determine a firm's comparative advantage. Therefore, measuring economic value not only helps in understanding a firm's competitive position but also its contribution to broader economic gains.