The theory of absolute advantage is:
A) The idea that free market forces should determine how much to trade with little government intervention.
B) The economic advantage one nation enjoys that is absolutely superior to other nations.
C) The idea that governments should actively protect domestic industries from imports and vigorously promote exports.
D) The belief that held that the wealth of the world was fixed and that a nation that exported more and imported less would enjoy the net inflows of gold and silver and thus become richer.

Question

Quizplus · Accepted Answer

The theory of absolute advantage, developed by Adam Smith, posits that in international trade, a country has an absolute advantage if it can produce a good more efficiently (i.e., at a lower cost) than another country. This concept focuses on the efficiency of producing goods and does not involve government intervention, protectionism, or the mercantilist view of fixed wealth.

The Theory of Absolute Advantage Is