An Implication of the Heckscher-Ohlin Theorem Is That

question 31

Multiple Choice

An implication of the Heckscher-Ohlin theorem is that

• A) if two countries have identical tastes, then no trade will occur between them.
• B) the relative price of a country's scarce factor of production will rise when the Country is opened to trade.
• C) income distribution in a country does not change when a country is opened to trade.
• D) two countries with identical tastes can still have a basis for trade if factor endowments Of the countries differ and if factor intensities of the commodities differ.

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Definitions:

Production Possibility Frontier

A curve depicting the maximum attainable combinations of two products that may be produced with available resources and current technology.

Inefficiency

A situation where resources are not used in the best possible way, often leading to waste and a lower output than could be achieved.

Trade

The exchange of goods, services, or both between two or more parties.

Factors of Production

The assets employed to produce goods and services, encompassing land, labor, capital, and entrepreneurship.