Reflective Post 1

Incentives come into play with almost every company in every industry and in particular with General Dynamics. General Dynamics is different from a majority of companies in that the company as a whole receives incentives for producing certain goods. These incentives come from the Government who contracts the production for General Dynamics production of weapons and munitions.  The company receives tax breaks for the continued productions of small arms for the military. The company also receives tax cuts for work with certain innovations which are set in place to encourage improvement in air planes and other flying or space technology. Inspectors within the company also receive incentives for "the prevention of defective bullets that would be hazardous to the operator from reaching the battlefield or military use." Essentially any employee who finds a defective bullet and removes it from the line is payed extra for protecting the soldier who might have used that bullet.

Aside from its experimental laboratory work General Dynamics produces two products; Munitions and Weapons. Depending on the demand they may produce more or less munitions than weapons and so they would need to swap some production from munitions to weapons and vis versa. As an example lets say General Dynamics produces four types of ammunition and three types of weapons in order to produce more of one type of weapon the company can give up the other types of weapons to produce more of that particular type.  Since the first set of factories being converted to the new weapon are also weapons factories they can produce the new weapon fairly efficiently but not as efficiently as the original factory making the opportunity cost of one unit of the new weapon equal to about two units of the old weapons.  As more and more production is put to the new weapon there are no longer any more weapons factories to convert so they must begin converting ammunition factories to weapons factories. Since the two products are so different it will have a higher opportunity cost along the lines of four units of ammunition to one unit of the weapon meaning that not all resources are fully adaptable to be used for all jobs. The same principal works in reverse, say somewhere along the line the company realizes they need to make ammunition for these weapons to be of any use converting the initial munitions factories back will be more efficient then converting weapons factories to munitions.

Comparative advantage is a situation where one company is able to produce a good at a lower cost of a second good than another company.  So if there are two products rounds and guns, and two companies General Dynamics and Generic inc. they can both maximize production by producing according to their comparative advantages. So say General Dynamics is able to produce no units of guns and 6 units of ammunition or 1 units of guns and 3 of ammunition or 2 of guns and none of ammunition.  Generic inc. might produce 0 and  4, or 2 and 2, or 4 and 0 guns and ammunition respectively. So General Dynamics holds the comparative advantage in ammunition giving up one unit of guns for three of ammo compared to Generic Inc.'s 1 to 1. Since General Dynamics holds the comparative advantage in ammo Generic Inc. has it for guns forgoing 1 unit of ammo for 1 of guns compared to General Dynamics 3 of ammo for 1 of guns. With these numbers the companies know that General Dynamics should produce ammo and Generic Inc. should produce guns so that they both fulfill their contracts and are able to produce as many goods as possible.