Mercantilism goes against which economic theory?

• A. Mercantilism is identical to free trade
• B. Mercantilism goes against Ricardo's theory of comparative advantage
• C. Mercantilism supports laissez-faire
• D. Mercantilism advocates free movement of goods

Answer: (B)

The central idea here is that mercantilism sees wealth as something to be amassed through a favorable trade balance and heavy government intervention, while Ricardo’s comparative advantage shows that free trade and specialization create mutual gains regardless of overall efficiency.

Mercantilism aims to strengthen the nation by exporting more than it imports, often using tariffs, quotas, and subsidies to protect domestic industry. This view treats trade like a zero-sum contest: a country gains wealth when it keeps rivals out and accumulates precious metals through surpluses.

Ricardo’s theory of comparative advantage argues that countries benefit by specializing in goods they produce relatively more efficiently (lower opportunity cost) and trading for others’ goods. Even if one country could produce everything more efficiently, both sides gain from exchanging goods according to comparative costs. This principle underpins free trade and the idea that open exchange yields greater overall welfare.

So mercantilism goes against Ricardo's comparative advantage because it emphasizes protection and wealth accumulation through trade restrictions rather than the gains from voluntary, specialized exchange that free trade promotes. The other statements don’t fit as well: mercantilism is not identical to free trade, and it does not align with laissez-faire or free movement of goods.