Which of the following are the limitations of Ricardo's theory of comparative advantage? Please select all that apply.

Question

Quizplus · Accepted Answer

Despite the powerful implication of the theory of comparative advantage by David Ricardo, there are some limitations. The theory claims all can gain from trade, but, in the reality, some industries may lose from international trade. When a country imports products that other countries can produce cheaper, the import-competing industries are likely to lose from trade. Job loss in these import-competing industries may occur because workers may not have skills to work in other industries that survive from international trade. Another limitation is that it does not consider time dimension, so, that it cannot explain technological changes. Hence, the option stating that job loss is likely to occur in exporting industries is incorrect. Other options are correct.

Which of the Following Are the Limitations of Ricardo's Theory