Which of the following are the assumptions of Ricardo's law of comparative advantage? a) Labour and…
Constant costs of production and no technical change (b and d only) are assumptions of Ricardo's law of comparative advantage. In the Ricardian model, labour is the sole…
Choose your answer
Which of the following are the assumptions of Ricardo's law of comparative advantage?
a) Labour and capital are perfectly mobile between nations
b) Constant costs of production
c) Countries impose tariffs on trade
d) No technical change
Answer and explanation
Correct answer B
Constant costs of production and no technical change (b and d only) are assumptions of Ricardo's law of comparative advantage. In the Ricardian model, labour is the sole factor of production and factors are completely immobile between nations, so statement a is false. The model also assumes free trade without tariffs or other trade restrictions, so statement c is false.
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Telangana SET (TG SET)