What dictates the pattern of trade in David Ricardo’s classical model ?
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Answer: B. Comparative advantage
Explanation
Ricardo argued that nations should specialize in goods where they have lower opportunity costs. Comparative advantage allows for mutually beneficial trade even if one nation is less productive. This principle explains why countries trade rather than attempting to produce everything domestically alone. David Ricardo was a classical economist who developed the theory of international trade patterns. Absolute advantage refers to the ability to produce more of a good with inputs. Opportunity cost is the value of the next best alternative foregone when making choices.
This theory is the foundation for modern arguments in favor of free international trade. Global supply chains are organized based on these principles to maximize total world output. Understanding this model helps explain the economic logic behind globalization and international trade agreements. Absolute advantage is not the primary driver of trade according to the Ricardian model. Physical advantage is not a formal economic term used in classical international trade theory. The direction of trade is determined by relative efficiencies, not by random environmental factors.
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