As a result of trade,specialization in the Ricardian model tends to be
A) complete with constant costs and with increasing costs.
B) complete with constant costs and incomplete with increasing costs.
C) incomplete with constant costs and complete with increasing costs.
D) incomplete with constant costs and incomplete with increasing costs.
E) dependent on the specific opportunity costs involved in production.

Question

Quizplus · Accepted Answer

In the Ricardian model, specialization is complete with constant costs because each country specializes in producing the good in which it has a comparative advantage. This results in both countries gaining from trade. However, specialization may be incomplete with increasing costs if there are diminishing returns to production in some sectors, which would increase the opportunity cost of producing additional units of a good. In this case, it may not be profitable for a country to specialize completely in that good, resulting in incomplete specialization.

As a Result of Trade,specialization in the Ricardian Model Tends