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Compared to Ricardian trade theory, modern trade theory provides a more general view of comparative advantage since it is based on all factors of production rather than just labor.
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Constant opportunity costs suggest that the relative cost of producing one product in terms of the other will remain the same no matter where a nation chooses to locate on its production-possibilities schedule.
There are two explanations of constant opportunity costs; (1) factors of production are imperfect substitutes for each other; (2) all units of a given factor have different qualities.
With increasing opportunity costs, a nation totally specializes in the production of the commodity of its comparative advantage; with constant opportunity costs, a nation partially specializes in the production of the commodity of its comparative advantage.
A nation's trade triangle denotes its exports, imports, and terms of trade.
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