Which of the following is NOT a key assumption of Ricardo's theory of comparative advantage?

CA Foundation · Business Economics · MTP · January 2025
Which of the following is NOT a key assumption of Ricardo's theory of comparative advantage?
(A) A. Two countries, each specializing in the good it can produce most efficiently, will both gain from trade.
(B) B. Resources are immobile between countries but mobile within a country.
(C) C. Trade occurs only due to differences in technology between countries.
(D) D. Both countries in trade can benefit even if one country is less efficient in producing both goods.

Suggested Answer and Working Notes:

Correct Answer: Option (C)

C. Trade occurs only due to differences in technology between countries.

Topics: International Trade

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