Which theory suggests that a country should export those goods and services for which it is more productive than other countries and import those goods and services for which other countries are more productive?

Question

Business

Sariah Hudson

1 April, 06:53

Which theory suggests that a country should export those goods and services for which it is more productive than other countries and import those goods and services for which other countries are more productive?

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Answers (1)

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Joy Maddox · Answer 1

The theory of absolute advantage

Explanation:

The theory of absolute advantage is a quantity-based approach to measuring the productivity of nations with respect to their output in international commercial dealings.

The theory was an Adam Smith's submission that emphasizes that nations of the world should specialize in producing goods and services that they are most productive.

The theory failed to address a major problem that in gaining a benefit another alternative benefit is lost, hence nations should also factor in the benefits they lose when they specialize in producing certain products.