Ricardo theory

According to classical economists, international trade takes place due to __________.

• Factor endowments

• Technological differences between countries

• International division of labour

• Currency value diffeerences

The theory of absolute cost difference is associated with __________.

• David Ricardo

• Adam Smith

• Alfred Marshall

• Bertil Ohlin

According to David Ricardo, the essence of international trade is ________.

• Absolute cost difference between countries

• Equal cost difference between countries

• Zero cost difference between countries

• Comparative cost difference between countries

Which of the following is an assumption of the ricardian theory trade?

• Labour is perfectly mobile between countries

• Labour is heterogeneous within a country

• Labour is perfectly immobile between countries

• Labour and capital are the two factors of production considered.

The Ricardian theory is a ______ side theory.

• Demand

• Supply

• Both demand and supply

• Dynamic

The comparative cost advantage theory comes to the implicit conclusion of _______.

• Incomplete international specialization

• Partial international specialization

• Complete specialization

• Competitive specialization

________ is used as the only measurement of cost of production in ricardo's theory of comparative cost.

• Labour hours

• Capital stock

• Raw material cost

• Both labour and capital

According to Ricardo's comparative cost theory of trade, the fundamental cause of cost difference between two countries is ______.

• Homogeneity of labour

• Heterogeneity of labour

• Availability of stock capital

• Availability of money capital

The comparative cost theory is considered as static theory because _________.

• It is based on increasing returns to scale

• It is based on constant returns to scale

• It is based on decreasing returns to scale

• It assumes the state of technological changes

Assume that there are 2 countries A and B, they can produce two goods X and Y. The theory of comparative advantage states that ________.

• Trade between two countries is beneficial if both the countries have equal cost advantage in production of X and Y.

• Trade between two countries is beneficial if both the countries have cost advantage in the production of X and Y.

• Trade between two countries is beneficial only if A has cost advantage and B has cost disadvantage in any one of the goods.

• Trade between two countries is beneficial even if A has cost advantage in both goods and B has cost disadvantage in both goods.