Which of the following is not the characteristics of theory of comparative cost advantage?
A. There is full employment of the factors of production
B. There are two countries, two commodities and two factors of production
C. There are two countries, two commodities and one factor of production
D. There is absence of transportation cost
E. The countries are capital intensive only
Choose the correct answer from the options given below:

Correct option is D

Option A: "There is full employment of the factors of production". TThis is true in the theory of comparative cost advantage. The theory assumes that both countries are using all their factors of production (labor, capital, etc.) efficiently to produce goods.

Option B: "There are two countries, two commodities, and two factors of production" This statement is False. Ricardo assumes only one factor (labor). The Heckscher-Ohlin model (not Ricardo’s) uses two factors (labor and capital).

Option C: "There are two countries, two commodities, and one factor of production".This statement is True. The model simplifies trade between two countries producing two goods using only labor.

Option D: "There is absence of transportation cost". This statement is True. Trade is costless; no expenses for shipping goods.

Option E: "The countries are capital intensive only".This statement is False. Ricardo’s model is labor-based, not capital-based. Capital intensity is relevant in Heckscher-Ohlin theory, not here.