In Country T, it takes 10 resources to produce 1 ton of cocoa and 13.5 resources to produce 1 ton of rice. In Country Y, it takes 40 resources to produce 1 ton of cocoa and 20 resources to produce 1 ton of rice. Country T has a comparative advantage over Country Y in cocoa. This follows the theory of comparative advantage, and we can say that engaging in free trade benefits all countries that participate in it; however, this conclusion stems from which of these inaccurate assumptions?   Multiple Choice   We have assumed constant returns to scale.   We have assumed the prices of resources and exchange rates in the two countries are dynamic.   We have assumed there are barriers to the movement of resources from the production of one good to another within the same country.   We have assumed that agrarian nations do not specialize in producing particular products.   We have assumed diminishing returns to specialization.

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Comparative Advantage and Absolute Advantage Analysis

The theory of absolute advantage was given by Adam Smith in the year 1776.