According to Ricardo, trade is possible between two countries when
A)One country has absolute advantage in production of both commodities
B)One country has an absolute advantage for production of both commodities but comparative advantage in the production of one commodity than the other country
C)One country does not have any advantage in the production of both commodities
D)A country does not have any line of production

Question

Quizplus · Accepted Answer

Ricardo's theory of comparative advantage suggests that trade can be beneficial for two countries even if one country has an absolute advantage in the production of all goods, as long as they have a comparative advantage in the production of at least one good. This means that the country can produce that good at a lower opportunity cost than the other country.

According to Ricardo, Trade Is Possible Between Two Countries When