n the two-good two-country Ricardian model studied in class, if Home has a compa

Question

n the two-good two-country Ricardian model studied in class, if Home has a comparative advantage in cloth rather than wine, then Hint: Remember that in this model, the existence of comparative advantage implies differences in technologies and therefore there must be trade.] O A Home exports cloth and imports wine B Home exports both cloth and wine OCHome imports both cloth and wine O D Home imports cloth and exports wine O E More information is required to know the direction of trade in the Ricardian model.

Explanation / Answer

In two good two country Ricardian model, the country export the good in which they have the comparative advantage and import the good in which they have comparative disadvantage.

Since, home country has comparative advantage in cloth rather than wine, then home country will export cloth and imports wine.

So, the correct answer is an option (A).

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