Adam Smith's Absolute Advantage Theory

Countries should specialize in producing goods for which they have a lower opportunity cost. (correct)

Countries should focus on producing goods with higher profit margins.

Countries should trade with each other only if they have an absolute advantage in all goods.

Trade is beneficial only if one country has an absolute advantage in all goods.

Countries have differentfactor endowments and technology.

Only two countries participate in international trade.

Trade is restricted by government policies.

All countries have access to the same technology and resources. (correct)

Increased economic growth through specialization. (correct)

Reduced competition in the domestic market.

Lower prices for imported goods.

Increased production of goods with lower opportunity costs.

<p>It assumes that countries have access to the same technology and resources.</p> Signup and view all the answers

<p>Absolute advantage focuses on the opportunity costs of production, while comparative advantage focuses on the absolute costs.</p> Signup and view all the answers