Final answer:
Establishing a sustainable competitive advantage is indeed vital for a firm's long-term financial success, and it does not solely rely on natural resources but also on various other factors. Comparative advantages can stem from technological advancements, skilled labor, and efficient business operations.
Step-by-step explanation:
The statement that establishing a sustainable competitive advantage is vital to a firm's long-term financial success is True. A sustainable competitive advantage means that the firm has developed a unique selling proposition or capabilities that allow it to outperform its competitors consistently over time. This could stem from various sources—innovative products, exceptional service, cost leadership, or a strong brand, to name a few. These advantages enable the firm to protect its market share, maintain profitability, and ensure long-term viability despite the changing market conditions or competitive pressures.
Addressing the self-check question: The source of comparative advantage does not have to be natural elements like climate and mineral deposits exclusively. Comparative advantage can arise from various factors, including but not limited to technological prowess, industry expertise, education of the workforce, innovative business practices, and economies of scale. These aspects of an economy can lead to better productivity and efficiency, hence providing the advantage.
Regarding firms in a monopolistically competitive market, it is unlikely for them to sustain economic profits or losses in the long run. Due to the ease of entry and exit in such markets, new firms will be attracted by profits, leading to increased competition and thus normalizing profits and losses over time.