Match each classical theory of international trade on the left with its defining principle or primary economist on the right.
- Theory of Absolute AdvantageFormulated by Adam Smith, emphasizing trade benefits when a country produces a commodity using fewer real resources than another.
- Theory of Comparative AdvantageFormulated by David Ricardo, demonstrating mutually beneficial trade based on relative efficiency and lower opportunity cost.
- Opportunity Cost Theory of TradeIntroduced by Gottfried Haberler, evaluating trade advantage by the foregone output of an alternative commodity rather than labor units alone.
Answer
Theory of Absolute Advantage pairs with Adam Smith's concept of producing goods using fewer resources; Theory of Comparative Advantage pairs with David Ricardo's relative efficiency and lower opportunity cost principle; Opportunity Cost Theory of Trade pairs with Gottfried Haberler's evaluation of trade using foregone output.
The Theory of Absolute Advantage is correctly matched to Adam Smith because he pioneered the idea of trade driven by absolute productivity differences. The Theory of Comparative Advantage is correctly matched to David Ricardo, who proved trade benefits arise from comparative lower opportunity costs. The Opportunity Cost Theory of Trade is correctly matched to Gottfried Haberler, who replaced the classical labor theory of value with opportunity cost analysis.
Step-by-Step Solution
Key Concept
Foundational Theories and Economists of International Trade
Estimated Time:1m 0s