Heckscher-Ohlin Model Quiz

What is the main prediction of the Heckscher-Ohlin model?

• Countries will specialize in the production of goods they can produce most efficiently.

• Countries will export goods that use their abundant factors of production intensively.

• Countries will trade with each other based on absolute advantage.

• Countries will import goods that use their scarce resources intensively.

According to the Heckscher-Ohlin model, which of the following is most likely true?

• Capital-abundant countries export labor-intensive goods.

• Labor-abundant countries export capital-intensive goods.

• Capital-abundant countries export capital-intensive goods.

• Labor-abundant countries have higher wages for skilled labor.

The Heckscher-Ohlin model suggests that trade between countries occurs because of differences in:

• Technology

• Factor endowments

• Demand patterns

• Exchange rates

Which of the following is NOT an assumption of the Heckscher-Ohlin model?

• Factors of production are immobile between countries.

• Technologies are identical across countries.

• Countries have different factor endowments.

• There are increasing returns to scale in production.

In the Heckscher-Ohlin model, what happens to the price of the factor that a country has in abundance after trade?

• It increases.

• It decreases.

• It stays the same.

• It becomes equal across countries.

The Heckscher-Ohlin model differs from Ricardo's model of comparative advantage in that it:

• Assumes that countries have different technologies.

• Explains trade based on differences in factor endowments rather than technology.

• Predicts that countries will not trade at all.

• Suggests that all countries benefit equally from trade.

Which theorem is derived from the Heckscher-Ohlin model and relates to the equalization of factor prices across countries?

• Stolper-Samuelson theorem

• Rybczynski theorem

• Factor Price Equalization theorem

• Leontief paradox

What is the key result of the Stolper-Samuelson theorem, which is an extension of the Heckscher-Ohlin model?

• Trade benefits all factors of production equally.

• Trade raises the real income of the factor that is used intensively in the export sector.

• Trade leads to the complete specialization of production.

• Trade reduces wage inequality between skilled and unskilled labor.

The 'Leontief Paradox' found that:

• The U.S., a capital-abundant country, exported labor-intensive goods, contrary to the Heckscher-Ohlin model.

• The U.S. imported more goods from developing countries than developed countries.

• The U.S. did not benefit from trade, despite being capital abundant.

• Trade increases wage inequality in labor-abundant countries.

Which of the following is an implication of the Heckscher-Ohlin model for a labor-abundant country like India?

• India will export capital-intensive goods.

• India's wage rates for labor will decrease with trade.

• India will export labor-intensive goods.

• India's demand for imported goods will decline as labor becomes more productive.