Q.Distinguish between Absolute Cost Advantage (Adam Smith) and Comparative Cost Advantage (David Ricardo).

Both theories explain why countries should specialise and trade, but they differ in exactly what condition makes specialisation worthwhile.

Absolute Cost Advantage (Adam Smith): a country should specialise in producing and exporting the good(s) it can produce using fewer resources or less labour time than another country, and import the good(s) where the other country is more efficient. This theory works well when each country is absolutely better at producing a DIFFERENT good — a natural basis for a mutually beneficial trade.

Comparative Cost Advantage (David Ricardo): Ricardo addressed the case Smith's theory could not explain — what if one country is absolutely better at producing EVERY good? Ricardo showed that specialisation and trade can still benefit both countries, as long as each specialises according to its relative (opportunity-cost) advantage — the good it is relatively LEAST inefficient at producing — rather than requiring an absolute advantage at all.

Key difference: Smith's theory is based on absolute differences in resource-use efficiency; Ricardo's theory is based on relative/comparative differences (opportunity costs), which is why comparative advantage is the more general and widely applicable of the two theories — it explains trade even in cases (like the worked example above) where absolute advantage alone would wrongly suggest no basis for trade exists.

Treating the two theories as contradictory rather than as Ricardo's theory being a MORE GENERAL extension that also covers the case Smith's theory leaves unexplained.