Which of the following is TRUE? A. Adam Smith proposed the theory of comparative advantage as the basis for trade in The Wealth of Nations. B. Absolute advantage is based on comparing the opportunity costs of trading partners. C. David Ricardo proposed the theory of absolute advantage as the basis for trade. D. The Ricardian model assumes labor is perfectly mobile.

Question

Social Studies

Gianni Pennington

5 July, 23:44

Which of the following is TRUE? A. Adam Smith proposed the theory of comparative advantage as the basis for trade in The Wealth of Nations. B. Absolute advantage is based on comparing the opportunity costs of trading partners. C. David Ricardo proposed the theory of absolute advantage as the basis for trade. D. The Ricardian model assumes labor is perfectly mobile.

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Hendrix · Answer 1

D. The Ricardian model assumes labor is perfectly mobile

Explanation:

This model assumes that labor is perfectly mobile, tech is constant, and markets are perfectly competitive. It was developed by David Ricardo in his classical theory of comparative advantage which explains why countries engage in international trade even though their production may be more efficient than its trade partners. The comparative advantage of countries were explained and based on these assumptions.