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Explain how absolute advantage and comparative advantage differ
Chapter 3, Problem Questions for Review 3.2(choose chapter or problem)
QUESTION:
Explain how absolute advantage and comparative advantage differ.
Questions & Answers
QUESTION:
Explain how absolute advantage and comparative advantage differ.
ANSWER:Step 1 of 3
Absolute advantage theory and comparative advantage theory are the two most important trade theories that have been developed to determine the mode and benefits of trade between two or more nations. The absolute advantage theory developed by Adam Smith formed the basis of trade under mercantilism while the comparative advantage theory developed by David Ricardo was dubbed as the modern trade theory.