The flat part of Home's export supply curve in the Ricardian model is due
To the assumption that:
A)Home has a comparative advantage in its export.
B)Home has an absolute advantage in its export.
C)the marginal product of labor is constant in the export good.
D)Home has more labor than Foreign.

Question

Quizplus · Accepted Answer

The flat part of Home's export supply curve in the Ricardian model is due to the assumption that the marginal product of labor is constant in the export good. This means that as long as there is available labor, the output of the export good will increase at a constant rate. This is the basis of the law of diminishing returns, which states that as more resources are added to a production process, the marginal product of each additional resource will eventually decrease. Therefore, assuming a constant marginal product of labor results in a flat supply curve for exports.

The Flat Part of Home's Export Supply Curve in the Ricardian