Because the Ricardian trade theory recognized only how supply conditions influence international prices,it could determine:
A) The equilibrium terms of trade
B) The outer limits for the terms of trade
C) Where a country chooses to locate along its production possibilities curve
D) Where a country chooses to locate along its trade triangle

Question

Quizplus · Accepted Answer

The Ricardian trade theory determined the outer limits of the terms of trade, which is the range within which terms of trade can vary between two countries based on their relative differences in productivity. The theory did not determine the equilibrium terms of trade, which depend on the intersection of domestic demand and supply curves with foreign supply and demand curves. The theory also did not address the location of a country along its production possibilities curve or its trade triangle.

Because the Ricardian Trade Theory Recognized Only How Supply Conditions