Google View Assessment X > Mon_3_Theory - Bb Collabo X + C ^ cuchd.blackboard.com/ultra/courses/_60092_1/grades/assessment/_20673300_1/overview/attempt/_19428733_1? X 6 OF 6 QUESTIONS RE Assignment Content Question 1 6 PC The Scottish economist Adam Smith developed the trade theory of absolute advantage in 1776. A country that has an absolute advantage produces greater output of a good or service than other countries using the same amount of resources. Smith stated that tariffs and quotas should not restrict international trade: it should be allowed to flow according to market forces. Contrary to mercantilism Smith argued that a country should concentrate on production of goods in which it holds an absolute advantage. No country would then need to produce all the goods it consumed. The theory of absolute advantage destroys the mercantilistic idea that international trade is a zero-sum game, According to the absolute advantage theory, international trade is a positive sum game. because there are gains for both countries to an exchange. Unlike mercantilism this theory measures the nation's wealth by the living standards of its people and not by gold and silver. There is a potential problem with absolute advantage. If there is one country that does not have an absolute advantage in the production of any product, will there still be benefit to trade, and will trade even occur? The answer may be found in the extension of absolute advantage, the theory of comparative advantage. Q.1. The theory of absolute advantage destroys the mercantilist idea that international trade is a zero-sum game. Discus this statement in light of the two contradicting theories? e View Assessment DELL F2 F3 F7 F10 2 3 5 7 O W E R T Y U O S D F G H J K