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6. Who said the following, " The essence of international trade is not the absolute difference in cost but a comparative difference in cost."

a. David Ricardo

b. Adam Smith

c. J.S.Mill

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Microeconomics
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Understanding the reason behind Intra-industry Trade between Similar Economies
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Raushan Raj
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2 Nov 2020

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Related questions

12. Which of the following economists is regarded as having developed the theory of comparative advantage?

All of the following are well-known classical economists except _____.
 
A. Adam Smith
B. David Ricardo
C. Arthur Laffer
D. Thomas Malthus
Discuss and explain the difference between the two.

The principle upon which Adam Smith first claimed that free trade benefits all countries. It holds that a country benefits from trade when it produces a particular good at a lower cost (in terms of labor input) than it costs to produce the good in any other country. By specializing the in the production and export of this good and importing goods whose production costs are higher than in other countries, the country can consume more of both goods. In trade theories, this principle was later replaced by the principle of comparative advantages.

Comparative Advantage is first fully stated by David Ricardo in the early nineteenth century, this concept holds that a country has a comparative advantage in a good if it can produce that good more cheaply than it can produce other goods. By specializing in the production of goods in which it holds a comparative advantage and importing the other goods, the country can consume more of all goods. In contrast to Adam Smith, therefore, this principle states that a country need not have an absolute advantage in any good to benefit from trade. The principle provides a powerful justification for liberal international trade by asserting that all countries benefit from such trade.

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