Factor Endowments and Heckscher-Ohlin Theory

The Heckscher-Ohlin theorem looks to ________ to explain trade flows.

• relative factor endowments

• the existence of trade barriers

• acquired comparative advantage

• the differences in preferences among consumers

The Heckscher-Ohlin theorem explains why the U.S. both imports and exports cars.

• TRUE

• FALSE

The quantity and quality of ________ of a country are its factor endowments.

• imports and exports

• deficits and surpluses

• labor, land, and natural resources

• commodity money and fiat money

Factor intensity is the amount of capital per unit of labour used in the production of commodities of X and Y

• True

• False

Identify ways to define factor abundance.

• Physical unit

• Complete specialization

• Autarky

• Relative factor price

Production possibility frontier skewed to the X-axis because of ____

• industry X need more labour in their production

• industry X need more capital in their production

• country resources are more on Labour

• country resources are more on Capital

An autarky point is ____

• absence of trade

• trade without protectionism

• point of incomplete specialization

• None of above

The movement to a higher community indifferent curve because of ____

• incomplete specialization and trading in both countries

• economies of scale

• product differentiation

• none of above

Identify the assumption(s) of Heckscher Ohlin model

• Two countries, two commodities and two factor of production

• different technology in production

• commodities are produce under increasing return to scale

• .all resources are fully employed

Heckscher Ohline model ____

• explain how comparative advantage is based on differences in factor endowments across nations

• explain trade affects relative factor prices within and across nations

• explain why trade is likely to be only a small reason for higher skilled-unskilled wage inequalities

• explain trade based from differentiated product