Problem
What are the key assumptions of the Ricardian model and what is the basis for comparative advantage in this model? What are the limitations of this model? What are the key assumptions of the Factor Proportions model (or the Neoclassical/HOS model) and what is the basis for comparative advantage in this model? Compare and contrast the Ricardian model to the Factor Proportions model. In particular, does free international trade improve the welfare of countries in both models? Who gains and losses from trade in the two models?