Which of the following represents the correct

Solution

1. Absolute Advantage (1776): Proposed by Adam Smith in The Wealth of Nations. Smith argued against mercantilism, suggesting that a country should specialize in producing goods that it can produce more efficiently (using fewer resources) than any other country.
2. Comparative Advantage (1817): Proposed by David Ricardo in Principles of Political Economy and Taxation. Ricardo refined Smith's idea by showing that even if one country is less efficient in producing all goods than another country, trade can still be beneficial. Countries should specialize in goods where they have the lowest opportunity cost .
3. Heckscher-Ohlin Theory (Factor Proportions Theory) (1919–1933): Developed by Swedish economists Eli Heckscher and Bertil Ohlin . This theory moved beyond labor productivity to focus on "factor endowments." It suggests that countries export goods that make intensive use of the factors (land, labor, or capital) that are locally abundant.
4. New Trade Theory (Late 1970s/Early 1980s): Pioneered by Paul Krugman . Unlike classical theories that assume constant returns to scale and perfect competition, New Trade Theory incorporates economies of scale and network effects . It explains why similar countries trade similar goods (intra-industry trade) and why first-mover advantages are critical in global markets.