Explain how the theories of trade differ in terms of their support to governmental intervention.

What will be an ideal response?

Ans: All theories agree that international trade is beneficial, but they all lack agreement on government policy recommendations. Mercantilism believes in government promoting exports and imports, while Smith, Ricardo, Heckscher-Olin like the case of unrestricted free trade. The new trade theory and Porter's theory believes in an advantage of limited government intervention.