Question

Q: The comparative advantage argument in defense of free trade deteriorates when,

	A) Three countries and three products are compared.
	B) The principle of increasing opportunity cost is present.
	C) Markets are not assumed to be static.
	D) All of the above.
	E) None of the above.

Answer 1

The answer is (a)

the comparative advantage theory works well for the 2 countries 2 commodities scenario and has been easily extended to 2 countries and many commodities. But, when both multiple countries and multiple commodities case is evaluated, the results no longer extend easily and are valid only under some very strong assumptions. Thus,

The comparative advantage argument in defense of free trade deteriorates when,Three countries and three products are compared.

All other options are incorrect as they do not lead to deterioration of the comparative advantage argument