Question

Choose the correct sequence of development of trade theories:
• [A.] Heckscher--Ohlin Model
• [B.] Theory of Comparative Advantages
• [C.] The Specific Factors Model
• [D.] The Theory of Absolute Advantages Choose the correct answer from the options given below:

• A. B, D, C and A
• B. D, B, C and A
• C. C, D, A and B
• D. A, B, C and D

Hint:

Remember the evolution of international trade theories: \[ \boxed{ \begin{aligned} 1776 &\rightarrow \text{Absolute Advantage (Adam Smith)}, 1817 &\rightarrow \text{Comparative Advantage (David Ricardo)}, \text{Later} &\rightarrow \text{Specific Factors Model}, \text{Later} &\rightarrow \text{Heckscher--Ohlin Model}. \end{aligned} } \] The sequence can be memorized as: \[ \boxed{\text{Absolute} \rightarrow \text{Comparative} \rightarrow \text{Specific Factors} \rightarrow \text{Heckscher--Ohlin}} \]

Answer 1

The Correct Option is B

Concept: International trade theories evolved over time to explain why countries engage in trade and how they benefit from it. Each theory built upon the ideas of its predecessors by incorporating new assumptions about production, factor endowments, and resource mobility. The chronological development of the major trade theories is:
• Theory of Absolute Advantage -- Adam Smith (1776)
• Theory of Comparative Advantage -- David Ricardo (1817)
• Specific Factors Model -- Paul Samuelson and Ronald Jones (20th century)
• Heckscher--Ohlin Model -- Eli Heckscher and Bertil Ohlin (1919--1933; developed as the Factor Endowment Theory)

Step 1: Identify the historical order of the theories. \[ \begin{aligned} \text{D} &\rightarrow \text{Theory of Absolute Advantage}, \text{B} &\rightarrow \text{Theory of Comparative Advantage}, \text{C} &\rightarrow \text{Specific Factors Model}, \text{A} &\rightarrow \text{Heckscher--Ohlin Model}. \end{aligned} \]

Step 2: Arrange the theories from earliest to latest. \[ \boxed{ \text{D} \;\rightarrow\; \text{B} \;\rightarrow\; \text{C} \;\rightarrow\; \text{A} } \] This sequence matches \[ \boxed{\text{(B) D, B, C and A}} \]