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Adam Smith Theory Of Absolute Advantage

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A.
According to Scottish Economist Adam Smith (1723-1790), Absolute Advantage is defined as a country’s proficiency to produce better in a certain good by using a lower cost than another nation. （Absolute Advantage Versus Comparative Advantage, 2016）The lower cost of a production in absolute advantage are not a fixed cost ,it may be flexible by the trade. (Adam Smith’s theory of absolute advantage and the use of doxography in the history of economics, 2016) In the theory of absolute advantage, a certain good referred to the awareness that will make the production in an efficiency way. (International Financial Mgmt. U1, 2015)

For example, if Nation X able to produce a certain good at a lower cost or in an efficiency way or maybe both than Nation Y, as a result, Nation X has an absolute advantage and also able to emphasis more on producing a good. Equivalently, if Nation Y is more efficiency in producing another good at a lower cost, it is able to focus more on producing a good as well. By the way of emphasizing, their labor force is able to become more experienced and expert to undertake the same jobs by the reason of it could help a country or a nation to emerge in a better and efficiency way. For that reason, a country will increase their emphasizing methods in order to have more incentive to produce a product in an efficiency way. (Carpenter and Dunung, 2013)

Another theory of international trade is comparative advantage, which is developed by David Ricardo. In 200

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