The Ricardian model of comparative advantage is based on all of the following assumptions except:
A) Only two nations and two products
B) Product quality varies among nations
C) Labor is the only factor of production
D) Labor can move freely within a nation

Question

Quizplus · Accepted Answer

The Ricardian model assumes that product quality is the same across nations, and therefore, nations specialize in producing goods in which they have a comparative advantage based on differences in labor productivity. The other assumptions - only two nations and two products, labor being the only factor of production, and labor being able to move freely within a nation - are all key assumptions of the Ricardian model.

The Ricardian Model of Comparative Advantage Is Based on All