By adjusting the model of comparative advantage to include transportation costs along with production costs we would expect ?

A. The prices of trade goods to be lower than when there are no transportation costs
B. specialization to stop when the production costs of the trading partners equalize
C. The volume of trade to be less than when there are no transportation costs
D. The gains from trade to be greater than when there are no transportation costs

Correct Answer: The volume of trade to be less than when there are no transportation costs ✔

Last Updated: June 18, 2019