Comparative Advantage and Hecksher-Ohlin Quiz

What is the definition of comparative advantage?

• The ability of a country to produce a good at a lower absolute cost than another country.

• The ability of a country to produce a good at a lower opportunity cost than another country.

• The ability of a country to produce more of a good than another country using the same amount of resources.

• The ability of a country to produce a good using fewer resources than another country.

Which of the following is an assumption of the Hecksher-Ohlin model?

• There are increasing returns to scale in production.

• There are only two countries and two goods.

• There is perfect competition in the markets.

• There is a single factor of production.

According to the Hecksher-Ohlin model, what determines the pattern of trade between countries?

• The absolute cost of production.

• The relative abundance of factors of production.

• The level of technology in each country.

• The size of the population in each country.

What is one effect of international trade according to the Hecksher-Ohlin model?

• It leads to equalisation of factor prices between countries.

• It increases the absolute cost of production in both countries.

• It decreases the variety of goods available in each country.

• It leads to a decrease in the standard of living in both countries.

Which of the following is a limitation of the Hecksher-Ohlin model?

• It assumes that technology is the same in all countries.

• It assumes that there are increasing returns to scale.

• It assumes that there are more than two factors of production.

• It assumes that there are more than two countries.

How does the Hecksher-Ohlin model explain the effect of trade on income distribution within countries?

• Trade benefits all factors of production equally.

• Trade benefits the factor of production that is relatively abundant.

• Trade benefits the factor of production that is relatively scarce.

• Trade has no effect on income distribution.

What is a key difference between the theory of comparative advantage and the Hecksher-Ohlin model?

• Comparative advantage focuses on absolute costs, while Hecksher-Ohlin focuses on opportunity costs.

• Comparative advantage considers technology differences, while Hecksher-Ohlin considers factor endowments.

• Comparative advantage assumes perfect competition, while Hecksher-Ohlin assumes monopolistic competition.

• Comparative advantage is based on factor endowments, while Hecksher-Ohlin is based on technology differences.

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

• Factors of production are immobile between countries.

• There are constant returns to scale in production.

• There are barriers to trade between countries.

• There are no transportation costs.

What does the Hecksher-Ohlin model predict about the export patterns of a capital-abundant country?

• It will export labour-intensive goods.

• It will export capital-intensive goods.

• It will export goods with high transportation costs.

• It will export goods with low technology requirements.

Which of the following is a criticism of the Hecksher-Ohlin model?

• It accurately predicts trade patterns in the real world.

• It does not account for differences in technology between countries.

• It assumes that all countries have the same factor endowments.

• It assumes that there are no gains from trade.