Question

The Ricardian model attributes the gains from trade associated with the principle of comparative advantage result to Group of answer choices differences in preferences. differences in technology. differences in resources. gravity relationships among countries. differences in labor productivity.

Answer 1

Answer:

The correct answer is letter "E": differences in labor productivity.

Explanation:

English economist David Ricardo (1772-1823) in his book "On the Principles of Political Economy and Taxation" (1817) elaborated one of the first works on international trade based on comparative advantage. According to Ricardo, one country has an absolute advantage over another if it is more efficient at producing given goods than other countries.

Ricardo assumed in his model there are only two countries each one producing one good. Production needs one input only: labor. Opportunity costs are constant in the two countries. Finally, there is no transaction or delivery cost in either country.