David Ricardo's simplified trade model assumes all of the following EXCEPT
A) trade is balanced, thus ruling out money flows between nations.
B) firms make production decisions in an attempt to maximize profit.
C) transportation costs are zero.
D) tariffs and quotas are used to protect a nation's producers from foreign competition.

Question

Quizplus · Accepted Answer

David Ricardo's simplified trade model assumes that trade is balanced, firms make production decisions to maximize profit, and transportation costs are zero. However, it does not assume that tariffs and quotas are used to protect a nation's producers from foreign competition. In fact, the model is based on the idea of free trade without trade barriers.

David Ricardo's Simplified Trade Model Assumes All of the Following