1126EconomicsMedium
By adjusting the model of comparative advantage to include transportation costs along with production costs we would expect?
AThe prices of trade goods to be lower than when there are no transportation costs
BThe gains from trade to be greater than when there are no transportation costs
Cspecialization to stop when the production costs of the trading partners equalize
DThe volume of trade to be less than when there are no transportation costs
Correct answer
D. The volume of trade to be less than when there are no transportation costs
Explanation
The correct answer is The volume of trade to be less than when there are no transportation costs.