CA Foundation · Business Economics · International Trade
Which economist is associated with the theory of absolute advantage, under which a country gains by exporting goods it can produce using fewer resources than other countries?
Adam Smith is associated with the theory of absolute advantage. He argued that a nation gains by specialising in and exporting goods it can produce with fewer resources than other nations. David Ricardo extended this idea into comparative advantage, which is a separate theory.
- ADavid Ricardo
- BAdam SmithCorrect
- CEli Heckscher
- DRaymond Vernon
Explanation
Adam Smith argued in The Wealth of Nations that a country should produce and export goods in which it has an absolute cost advantage, i.e. it uses fewer resources per unit than others. David Ricardo developed comparative advantage, which is a different theory, so option A is wrong.
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