Purchase Solution

Ricardo's theory of comparative advantage, protectionism

Not what you're looking for?

Ask Custom Question

Review the following:

Palen, M. (2016). The Return of Protectionism. History Today, 66(5), 6.

Consider the statement "Protectionism is the progressivism of fools". Discuss how David Ricardo demonstrated the advantages of free trade using the concept of comparative advantage and opportunity cost. Why do you think so many politicians are unable or refuse to understand this? Give examples of this. How might you be impacted and react to the government engaging in protectionism in your role as a business manager and a consumer?

Purchase this Solution
Solution Summary

This posting discusses Ricardo's theory of comparative advantage, the reasons for protection, and how protectionism adversely affects business managers and consumers

Solution Preview

Ricardo's comparative advantage means an economy's ability to produce goods and services at an opportunity cost that is lower than that of its trade partners. Comparative advantage allows the firm to sell goods and services at a lower price than that of its competitors and earn larger profits. According to Ricardo, a country benefitted from foreign trade because of the differences in relative opportunity costs of producing the same goods in different countries (a). Opportunity costs according to Ricardo were the costs in terms of other goods given up. Ricardo said that comparative advantage means how under free trade, a country will produce more of and consume less of a particular good for which it has a comparative advantage. This theory describes the economic benefits from trade by persons, companies, or countries which occur from their differences in the factors they have, or technological progress. For example, the United States has a comparative advantage because of technological progress, it will gain from free trade because of its advantages related to technological progress (b). Ricardo cautions that one should not compare the monetary costs of ...

Solution provided by:
Kasim Johar, MBA
Education
  • MBA, Indian Institute of Social Welfare and Business Management
  • BSc, University of Calcutta
Recent Feedback
  • "awesome"
  • "Appreciate the help. This is Awesome"
  • "Thanks, awesome notes!!! "
  • "AWESOME!!!!!!!!"
  • "Great notes, I appreciate the help"
Purchase this Solution
Free BrainMass Quizzes
Basics of Economics

Quiz will help you to review some basics of microeconomics and macroeconomics which are often not understood.

Elementary Microeconomics

This quiz reviews the basic concept of supply and demand analysis.

Economics, Basic Concepts, Demand-Supply-Equilibrium

The quiz tests the basic concepts of demand, supply, and equilibrium in a free market.

Economic Issues and Concepts

This quiz provides a review of the basic microeconomic concepts. Students can test their understanding of major economic issues.

Pricing Strategies

Discussion about various pricing techniques of profit-seeking firms.

View More Free Quizzes
Related BrainMass Solutions

  • Absolute advantage, Comparative advantage and Ricardian Model

    Theory of Comparative Advantage If a nation is relatively more efficient in production of a good than another nation then we can say that the nation has comparative advantage in production of that good.

  • Factor-Endowment Trade theory

    The HO theory explains the reason for comparative advantage for any goods is due to differences in the supply of factors of production. A country will have comparative advantage in producing goods that used the country's abundant factor.

  • Trade theory

    In comparison to the theory of absolute advantage, Ricardo's theory of comparative advantage (1817) does not answer why production cost differ (financial) within each country and also no consideration is given to the possibility of producing the same

  • Trade Policy and Offshoring Strategy

    (Ricardo's Comparative advantage) b. What is Dynamic Comparative Advantage? What are the implications of this for the current debate on "Outsourcing" and "Off-shoring?" (Vernon's Theory) c.

  • Pattern of Trade and Gains From Trade

    The free trade price will be cheaper because of the technological advance. Looking at hypothetical countries, we examine the pattern of trade and gains from trade according to Ricardo's theory of comparative advantage.

  • NAFTA & Comparative Advantage

    David Ricardo's theory of comparative advantage , which he used to argue against the corn laws, states that specialization and free trade will benefit all trading partners (real wages will rise), even those that may be absolutely less efficient producers

  • Free Trade and its benefits and costs

    According the absolute advantage theory of Adam Smith as well as Ricardo's theory of comparative advantage all parties involved in specialization and trade will be better off. In this sense, free trade is good.

  • Comparative advantage vs. absolute advantage

    The Ricardo's comparative advantage theory stipulated that mutually beneficial trade between two countries can occur even when one nation has no absolute advantage in the production of all goods as compared to its trading partner.

  • Production Economic Theory

    The economic theory of comparative advantage shows that gains from free trade outweigh any losses as free trade creates more employment because it allows countries to specialize in the production of goods and services in which they have a comparative

View More Related Solutions