Ricardo's theory of comparative advantage was of limited real-world validity because it was founded on the:
A) Labor theory of value
B) Capital theory of value
C) Land theory of value
D) Entrepreneur theory of value

Question

Quizplus · Accepted Answer

Ricardo's theory of comparative advantage was founded on the labor theory of value, which assumes that the value of a good is determined by the amount of labor required to produce it. However, this theory does not account for differences in technology, natural resources, or capital, which can all influence a country's comparative advantage in producing goods. As a result, the theory has limited real-world validity.

Ricardo's Theory of Comparative Advantage Was of Limited Real-World Validity