Problem
1. Identify the basic questions with which modern trade theory is concerned.
2. How did Smith's views on international trade differ from those of the mercantilists?
3. Develop an arithmetic example that illustrates how a nation could have an absolute disadvantage in the production of two goods and could still have a comparative advantage in the production of one of them.
4. Both Smith and Ricardo contended that the pattern of world trade is determined solely by supply conditions. Explain.