Question

8. In 1821 David Ricardo wrote that: England may so circumstanced, that to produce the cloth may require the labour of 100 men for one year, and if she attempted to make the wine, it might require the labour of 120 men for the same time...To produce the wine in Portugal, might require only the labour of 80 men for one year, and to produce the cloth in the same country, might require the labour of 90 men for the same time. It would therefore be advantageous for her to export wine in exchange for cloth. The exchange might even take place, notwithstanding that the commodity imported by Portugal could be produced there with less labour than in England.

Answer 1

Ricardian theory can also be explained by opportunity costs.

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