The trading principle formulated by Adam Smith maintained that
A) international prices are determined from the demand side of the market.
B) differences in resource endowments determine comparative advantage.
C) differences in income levels govern world trade patterns.
D) absolute cost differences determine the immediate basis for trade.

Question

Quizplus · Accepted Answer

Adam Smith's trading principle, known as the theory of absolute advantage, suggests that trade is driven by absolute cost differences between countries, where each country specializes in producing goods it can produce more efficiently than others.

The Trading Principle Formulated by Adam Smith Maintained That