The Heckscher-Ohlin model assumes that there are two countries, each of which produces two goods (say manufactures and agriculture) using labor and capital. Which of the following is an additional assumption of the Heckscher-Ohlin model?
A. One nation has larger quantities of both capital and labor than the other country.
B. Labor and capital can move between countries.
C. Capital is a specific resource in producing manufactured goods, and labor is a specific resource in producing agricultural goods in each country.
D. The ratio of the quantity of labor to the quantity of capital is different for each nation, resulting in different endowments of capital and labor.
The Heckscher-Ohlin model assumes that there are two countries, each of which produces two goods (say manufactures and agriculture) using labor and capital. Which of the following is an additional assumption of the Heckscher-Ohlin model?
A. One nation has larger quantities of both capital and labor than the other country.
B. Labor and capital can move between countries.
C. Capital is a specific resource in producing manufactured goods, and labor is a specific resource in producing agricultural goods in each country.
D. The ratio of the quantity of labor to the quantity of capital is different for each nation, resulting in different endowments of capital and labor.
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Related questions
1. Use the information in the table below to answer the following questions.
| US | Argentina | |
| wheat | 300 | 20 |
| beef | 100 | 20 |
(a) Does either country have an absolute advantage in the production of wheat or beef? Explain.
(b) What is the opportunity cost of wheat in each country?
(c) What is the opportunity cost of beef in each country?
(d) Analyze comparative advantage and opportunities for trade between the U.S. and Argentina.
2. Suppose that China is labor-abundant country and U.S. is capital-abundant country. iPad is capital-intensive and cloth is labor-intensive. Show that U.S. exports iPad after opening up to trade using Heckscher-Ohlin model.
3. Explain the immiserizing growth using standard trade model.
4. Consider the following Heckscher-Ohlin model: there are two countries, America and China, two goods, high-tech manufactures and low-tech manufactures, and two factors of production, skilled labor and unskilled labor. America is skilled-labor abundant and China is unskilled-labor abundant. High-tech manufactures are skilled-labor intensive and low-tech manufactures are unskilled-labor intensive. What happens to the price of high-tech manufactures relative to the price of low-tech manufactures in America following trade?
