Who introduced the theory of Absolute Advantage?
Adam Smith
What is a tariff?
A tax on imported goods
What is an Absolute Advantage?
Can produce a good at a higher quantity at the same cost or same quantity at a lower cost compared to another country.
What is one major limitation of the theory of absolute advantage?
The theory cannot explain trade when one country has an absolute advantage in producing all goods. It doesn’t show how countries would benefit or specialize in that case.
When countries focus on producing goods where they have an advantage, it’s called?
Specialisation
What is natural advantage?
When a country’s natural resources or climate favor the production of a certain good, giving it an edge in producing that good more efficiently
True or False: According to Adam Smith, having an absolute advantage means a country should always produce that good
True
When trade benefits both countries, economists call this a _______ situation
A win-win situation
Name one method through which a country or agent can achieve an absolute advantage
Lower production cost
True or False: Absolute Advantage Theory has been used to justify exploitative policies
True