Comparative Cost Advantage theory was given by:
Options
AAdam Smith
BDavid Ricardo
COhlin
DMarshall
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International TradePYQ - May 2018 (Inter)Question 161 of 20
All Questions Correct Answer
✅ Option b — David Ricardo
All Options:
- AAdam Smith
- BDavid Ricardo
- COhlin
- DMarshall
Detailed Solution & Explanation
To determine the correct answer, let's break down the key concept of Comparative Cost Advantage theory.
• This theory explains how countries can benefit from international trade even if they don't have an absolute advantage in producing a particular good or service.
• The concept is based on the idea that countries should specialize in producing goods for which they have a lower opportunity cost, relative to other countries.
• The theory was developed to show that countries can gain from trade by exporting goods that they can produce at a lower opportunity cost and importing goods that would be more costly to produce domestically.
The correct answer is associated with David Ricardo, who introduced the concept of comparative advantage in his book "On the Principles of Political Economy and Taxation" in 1817.
• Adam Smith is known for the concept of absolute advantage, which is different from comparative advantage, so he is not the correct answer.
• Other economists like Ohlin and Marshall also made significant contributions to international trade theory, but they are not credited with the development of the Comparative Cost Advantage theory.
About This Chapter: International Trade
Paper
Paper 4: Business Economics
Weightage
10%
Key Topics
Theories, Trade Policy, Exchange Rates
This chapter explores trade between nations — why countries trade, the theories of Absolute and Comparative Advantage, Balance of Payments, Exchange Rate systems (Fixed vs Flexible), and India's trade policy including tariffs, quotas, and WTO rules.
View Official ICAI SyllabusExam Strategy Tip
Understand Comparative Advantage theory thoroughly — it's the foundation of international trade. Also focus on the Balance of Payments structure and what causes deficits.
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