In the Heckscher-Ohlin Model, When Two Countries Begin to Trade

question 34

Multiple Choice

In the Heckscher-Ohlin model, when two countries begin to trade with each other

• A) the relative prices of traded goods in the two countries converge.
• B) relative factor prices in the two countries diverge.
• C) benefits from trade are evenly distributed between the two countries.
• D) all factors in both countries will gain from trade.
• E) all factors in one country will gain, but there may be no gains in the other country.

---

Definitions:

Industrial Market Economies

These are economies characterized by significant industrial activity, where goods are produced using advanced technological means.

Sub-Saharan African

Referring to the geographical area of the African continent that lies south of the Sahara Desert, characterized by diverse cultures, languages, and economies with varying levels of development.

Poor Countries

Poor countries are those with low levels of economic productivity, insufficient incomes, and a general standard of living considered below acceptable norms.

Industrial Market Economies

Economies characterized by sectors that primarily focus on manufacturing and industrial activities, as opposed to agricultural or service sectors, generally involving a significant use of technological and capital investment.