Question

Adam smith theory of absolute advantage the balance

Answer 1

Answer:

Absolute Advantage. According to Adam Smith, who is regarded as the father of modern economics, countries should only produce goods that they have an absolute advantage in. A country is said to have an absolute advantage if the country can produce a good at a lower cost than another.

The producer that requires a smaller quantity inputs to produce a good is said to have an absolute advantage in producing that good. Comparative advantage refers to the ability of a party to produce a particular good or service at a lower opportunity cost than another.