The theory of absolute advantage destroys the mercantilist idea that international trade is a ________.
A) positive-sum game
B) zero-sum game
C) negative-sum game
D) win-win game

Question

Quizplus · Accepted Answer

The theory of absolute advantage, developed by Adam Smith, argued that countries should specialize in producing goods for which they have an absolute advantage, in terms of lower opportunity costs, and trade with other countries for goods in which they have a higher opportunity cost. The theory suggests that both countries can benefit from trade and that it is not a zero-sum game. Mercantilist idea, on the other hand, sees international trade as a zero-sum game where one country's gain is another country's loss. Thus, absolute advantage theory negates the mercantilist idea that international trade is a zero-sum game.

The Theory of Absolute Advantage Destroys the Mercantilist Idea That