The _____ model analyzes trade under the assumption that opportunity costs are constant and therefore production possibility frontiers are straight lines.

Question

Quizplus · Accepted Answer

The Ricardian model is based on the assumption that opportunity costs are constant, which leads to the production possibility frontier being a straight line. This model is used to analyze trade patterns between countries based on their comparative advantage in producing certain goods. The other models listed (pauper labour fallacy, Heckscher-Ohlin, oligopoly) do not make this assumption about constant opportunity costs.

The _____ Model Analyzes Trade Under the Assumption That Opportunity