Answer to Question 1
Adam Smith's absolute advantage principle states that each country benefits by producing only those products in which it has an absolute advantage, allowing it to specialize in those products that it can produce at a lower cost than other countries and exporting them, and then importing other products it needs. Thus, each country increases its welfare by specializing in the production of certain products and importing others.
A modern example of the principle at work involves the nations of Japan and Saudi Arabia. Japan has no natural holdings of oil, but it manufactures some of the best automobiles in the world. On the other hand, Saudi Arabia produces much oil, but it lacks a substantial car industry. Given the state of their resources, it would be wasteful for each of these countries to attempt to produce both oil and cars. By trading with each other, Japan and Saudi Arabia each employs its respective resources efficiently in a mutually beneficial relationshi
Answer to Question 2
A
Please provide me with a solution for part b.
Is the principle of cause and effect unfounded?
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