The best explanation of the gains from trade that David Ricardo could provide was to describe only the outer limits within which the equilibrium terms of trade would fall.This is because Ricardo's theory did NOT recognize how market prices are influenced by
A) demand conditions.
B) supply conditions.
C) business expectations.
D) profit patterns.

Question

Quizplus · Accepted Answer

Ricardo's theory of comparative advantage, which underpins the classical theory of international trade, primarily focuses on the supply side—specifically, the relative productivity of nations in producing different goods. It does not incorporate demand conditions into the explanation of how trade benefits countries, thus limiting its ability to fully explain the determination of market prices and the equilibrium terms of trade.

The Best Explanation of the Gains from Trade That David