Ricardo's theory showed that if nations are allowed to trade freely, the
Result will be that:
A)all trading nations benefit by trade.
B)the manufacturing sector benefits but the consumers lose out.
C)workers benefit but the government loses tax revenue.
D)the gains from trade offset the losses from trade exactly.

Question

Quizplus · Accepted Answer

Ricardo's theory of comparative advantage showed that if nations specialize in producing goods in which they have a lower opportunity cost and then trade with others, both parties will benefit from the exchange. This leads to increased efficiency, lower prices, and higher economic output for all trading nations. Therefore, all trading nations benefit by trade, making choice A the correct answer.

Ricardo's Theory Showed That If Nations Are Allowed to Trade