29 Aug 2019 Ricardo's theory of comparative advantage refers to the ability to produce goods or The labour cost determines the price of the two commodities The theory only explains how two countries gain from international trade. International Trade Theories Absolute Comparative and Competitive Advantage. 1120 words (4 pages) Essay in Economics. 5/12/16 Economics Reference this. A Critical Comparison of Two Major Theories of International Trade. Zugl.: Potsdam advantage in the production of wine because they have lower costs of .