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

The simplified trade model of David Ricardo assumes free trade, meaning that tariffs and quotas are not used to protect a nation's producers from foreign competition. Therefore, option D, which assumes the use of tariffs and quotas, is not included in Ricardo's model. The other options, A, B, and C, are included in the model, as trade is balanced, firms aim to maximize profit, and transportation costs are assumed to be zero.

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