Match List I with List II:

​Choose the correct answer:​

Correct option is C

The correct matching is:

• A – Mercantilism → II (Gold and silver are the mainstay of national wealth):
  Mercantilism views wealth in terms of accumulated precious metals (mainly gold and silver). The policy encourages exports over imports to amass bullion and maintain trade surpluses.

• B – Theory of Absolute Advantage → III (Countries should specialize in goods where they have absolute advantage):
  Proposed by Adam Smith, this theory suggests that if a nation can produce a good more efficiently than another, it should specialize in that good and trade for others.

• C – Theory of Comparative Advantage → IV (Nations should produce goods with greatest relative advantage):
  Introduced by David Ricardo, this theory holds that even if a country does not have an absolute advantage, it should specialize in goods where its opportunity cost is lower, hence the "relative" advantage.

• D – Factor Endowment → I (The range of products made or grown for export depends on factor availability):
  This theory, also known as the Heckscher-Ohlin theory, states that nations export goods that use their abundant and cheap factors of production (like labor, land, or capital) intensively.

Information Booster:

• Comparative advantage is foundational to modern international trade theory.

• It explains how trade can benefit all countries, even when one is less efficient in producing all goods.

• It relies on the principle of opportunity cost: the next best alternative foregone.

• Encourages specialization, which increases total global output.

• Supports free trade policies and international cooperation.

• Comparative advantage results in mutual gains from trade even when absolute advantage is absent.