In the Situation of "Demand Reversal" in a 2x2x2 Context

question 24

Multiple Choice

In the situation of "demand reversal" in a 2x2x2 context where all the assumptions of the Heckscher-Ohlin analysis hold except for the assumption of identical demands across Countries, and when the countries are trading with each other,

• A) one country will be conforming to the trade pattern predicted by the Heckscher-Ohlin Theorem but the other country will not be conforming to that pattern.
• B) both countries will be conforming to the trade pattern predicted by the Heckscher-Ohlin theorem if the "price" (or "economic") definition of relative factor Abundance is used but not if the "physical" definition of relative factor abundance Is used.
• C) both countries will be conforming to the trade pattern predicted by the Heckscher-Ohlin theorem if the "physical" definition of relative factor abundance is used but Not if the "price" (or "economic") definition of relative factor abundance is used.
• D) factor price equalization across the two countries cannot occur.

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