1.

What is the key assumption of the Ricardian model in

international trade?
• A) Differing tastes and preferences between countries
• B) Differences in production technology between countries
• C) Constant returns to scale
• D) The existence of tariffs between trading nations
2. According to the Ricardian model, what determines a country’s
comparative advantage?
• A) Absolute advantage in all goods
• B) Higher consumption levels of a specific good
• C) Lower opportunity cost in producing a specific good
• D) Higher output in producing a specific good
3. In the Ricardian model, international trade benefits arise
because of:
• A) Economies of scale
• B) The labor productivity differences between countries
• C) The existence of multiple inputs
• D) Government intervention in trade
4. In the Ricardian model, the opportunity cost of producing a
good is measured by:
• A) The labor required to produce the good
• B) The labor required to produce the alternative good
• C) The price of the good in the international market
• D) The amount of another good that must be given up
5. Which of the following statements is true in the Ricardian
model?
• A) Both countries gain from trade if each specializes in the good for
which they have an absolute advantage.
• B) Only the country with an absolute advantage gains from trade.
• C) Both countries gain from trade if each specializes in the
good for which they have a comparative advantage.
• D) No country gains from trade unless it can produce all goods more
efficiently.
 6. The Ricardian model assumes that there is only one factor of
production, which is:
• A) Capital
• B) Labor
• C) Land
• D) Technology
7. If country A can produce wine using fewer labor hours than
country B, country A has:
• A) A comparative advantage in wine production
• B) An absolute advantage in wine production
• C) A higher opportunity cost in wine production
• D) A comparative disadvantage in wine production
8. In the Ricardian model, if country A has a lower opportunity
cost for producing wheat compared to cloth, it should:
• A) Export cloth and import wheat
• B) Import both cloth and wheat
• C) Export wheat and import cloth
• D) Produce both wheat and cloth equally
9. What is the main insight of the Ricardian model regarding
trade?
• A) Both countries benefit from trade even if one country is
more productive in both goods.
• B) Only the more productive country benefits from trade.
• C) Trade reduces overall global output.
• D) Trade only benefits the larger country.
10. Which of the following is not an assumption of the Ricardian
model?
• A) Two goods are produced
• B) Perfect mobility of labor within a country
• C) Labor is the only factor of production
• D) Tariffs and trade barriers exist between countries
11. According to the Ricardian model, the pattern of trade is
determined by:
 • A) Absolute advantage
• B) Currency exchange rates
• C) Comparative advantage
• D) Government policies
12. In the Ricardian model, which country benefits from trade?
• A) Only the more efficient country
• B) Both countries benefit
• C) Only the less efficient country
• D) Neither country benefits
13. The Ricardian model assumes that labor is:
• A) Immobile between countries but mobile within countries
• B) Mobile between countries but immobile within countries
• C) Mobile both between and within countries
• D) Immobile both between and within countries
14. The Ricardian model of international trade demonstrates that:
• A) Trade is based on absolute advantage
• B) Specialization based on comparative advantage benefits all
trading partners
• C) Trade increases wages in all countries
• D) Countries should produce only the goods they are most productive
at
15. In the Ricardian model, which of the following determines
wages in a country?
• A) The overall output of the country
• B) The price of goods in the global market
• C) The productivity of labor in producing the export good
• D) The level of government intervention
16. If the world price of a good is between the two countries’
opportunity costs, what will happen?
• A) No trade will occur
• B) Both countries will benefit from trade
• C) Only one country will benefit from trade
• D) Trade will harm one of the countries
17. The Ricardian model does not explain:
• A) The gains from trade
• B) How trade is based on comparative advantage
• C) Why some industries experience decreasing returns to scale
• D) Why wages differ across countries
18. In the Ricardian model, technological differences between
countries:
• A) Have no impact on trade patterns
• B) Lead to comparative advantages
• C) Reduce the benefits of trade
• D) Are assumed to be eliminated through trade
19. What is the outcome of countries specializing according to
comparative advantage, according to the Ricardian model?
• A) World production increases
• B) World production decreases
• C) World production remains the same
• D) Only the more developed countries gain from trade
20. Which of the following best describes “comparative
advantage”?
• A) The ability to produce more of a good with the same amount of
resources
• B) The ability to produce a good at a lower opportunity cost
than another country
• C) The ability to trade goods without tariffs
• D) The ability to import more goods than export

21. In the Ricardian model, if two countries have the same opportunity cost of
producing a good, what is the expected outcome of trade?

• A) No trade will occur because there is no comparative advantage.

• B) Trade will benefit both countries equally.

• C) Trade will occur, but only if there are tariffs to balance costs.
 • D) Both countries will specialize in the same good.

22. In the Ricardian model, which of the following factors would cause a
country to lose its comparative advantage in a particular good?

• A) A decrease in labor productivity in that good relative to another

good.

• B) A reduction in tariffs on imported goods.

• C) An increase in demand for that good domestically.

• D) An increase in absolute advantage in all goods.

23. Which of the following is a limitation of the Ricardian model when

explaining modern global trade patterns?

• A) It assumes multiple factors of production.

• B) It assumes constant returns to scale.

• C) It does not account for differences in technology between

countries.

• D) It assumes perfect competition in all markets.

24. According to the Ricardian model, which of the following would likely
increase a country’s overall welfare from trade?

• A) Decreasing productivity in all industries.

• B) Improving labor productivity in the industry where the country

already has a comparative advantage.

• C) Increasing tariffs to protect domestic industries.

 • D) Shifting labor from the less productive to the more productive industry
without engaging in trade.

25. Which assumption of the Ricardian model is often criticized for its
oversimplification of international trade?

• A) The assumption that trade is determined by comparative advantage.

• B) The assumption that labor is the only factor of production.

• C) The assumption that technology differs between countries.

• D) The assumption that countries can trade freely without restrictions.

26. In the Ricardian model, if Country A can produce both goods more
efficiently than Country B, how does trade benefit both countries?

• A) Country B will stop producing goods and become dependent on imports.

• B) Country A will specialize in the good where it has a lower opportunity cost,
while Country B specializes in the other good.

• C) Both countries will produce the same goods and trade for efficiency gains.

• D) There will be no benefit from trade because of Country A’s absolute

advantage in both goods.