The Assumption of Diminishing Returns in the Heckscher- Ohlin Model

question 10

Multiple Choice

The assumption of diminishing returns in the Heckscher- Ohlin model means that,unlike in the Ricardian model,it is likely that

• A)countries will not be fully specialized in one product.
• B)global production will decrease under trade.
• C)countries will benefit from free international trade.
• D)countries will consume outside their production possibility frontier.
• E)comparative advantage will not determine the direction of trade.

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