Multiple choice

On which of the following assumptions the comparative cost theory of trade is based upon?

  1. The labour theory of value

  2. Two nations and two commodities

  3. Zero transportation cost

  4. All of the above
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Ricardo's comparative cost theory rests on multiple simplifying assumptions: labor theory of value (classical economics), two nations and two commodities model, and zero transportation costs. These are foundational simplifications to demonstrate the principle of comparative advantage.

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