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The Theory of Absolute Advantage and Comparative Advantage 1. Reasons for international trade Question: What are the important reasons for international trade? Resource reasons, economic reasons, political reasons. Resource reasons Favorable climatic conditions and terrain Natural resources (the Middle East oil) Skilled workers Capital resources Favorable geographic location and transport costs Insufficient production Economic reasons Absolute advantage Comparative advantage Absolute advantage By Adam Smith in the Wealth of Nations (1776) [being able to produce at a lower real cost than