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Komalavalli · Accepted Answer

Q1)
Modern theory is concerned with opportunity cost, absolute, comparative advantage, labour value theory, trade specialization.
Q2)
Adam Smith defined commerce as the outcome of countries having an absolute advantage over one another in the production of certain products. Absolute advantage, according to Theory is concerned with the situation in which one country can manufacture one unit of a good with less labour than another. Mercantilism is a political and economic philosophy that advocates for government control of international commerce in order to gain wealth and national dominance. Traders and governments collaborate to decrease trade deficits and generate trade surpluses.
Q3)
Let us consider country A and B are producing cars and computers which is given in table below
	 
	A
	B
	Cars
	10
	20
	computers
	30
	40
From this we can say that the both country has absolute disadvantage in producing computers.
	 
	Opportunity cost of country A
	Opportunity cost of country B
	Cars
	3
	2
	computers
	0.33
	0.5
From above table we can say that the both countries has comparative advantage in producing computers
Q4)
Ricardo agrees with Smith that labour is the primary measure of value in exchange. Ricardo believes that the absolute theory of the value of labour is true if the relative values of distinct things are equal to the labour required to generate them. They both agreed that the supply side factor such as labour contributes towards trade but without a demand there will be non existence of trade,

I can send you the e-book link if necessary.

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