Ricardo's model of comparative advantage assumed all of the following EXCEPT
A) in each nation, labor is the only input.
B) costs do not vary with the level of production.
C) perfect competition prevails in all markets.
D) transportation costs rise as distance increases between countries.

Question

Quizplus · Accepted Answer

Ricardo's model assumes that transportation costs are zero or negligible, so they do not vary with distance between countries. Therefore, D is the correct answer as it states that transportation costs do rise with distance, which is not assumed in the model. A, B, and C are all correct assumptions made in Ricardo's model.

Ricardo's Model of Comparative Advantage Assumed All of the Following