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26 December, 09:29

Assume country A has an absolute advantage in producing all products compared to country B. Are there opportunities for gains from trade? If so, what determines the direction of trade?

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  1. 26 December, 10:29
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    False

    Explanation:

    Principle of absolute advantage refers to the ability of Country A to produce a greater quantity of a good, product, or service than Country B, using the same amount of resources. This theory is first described by Adam Smith in context of international trade,

    Since trade is an exchange of commensurate values and benefits within scope of agreement of parties involved, then trade between Country A and B would always prove abortive.
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