Why Is the PPF Bowed Out in the Heckscher­Ohlin Model

question 94

Multiple Choice

Why is the PPF bowed out in the Heckscher­Ohlin model?

• A)Capital is specific to the production of one good.
• B)Labor is specific to the production of the other good.
• C)There are increasing opportunity costs of producing each good.
• D)Labor is not perfectly mobile between the production of the two goods.

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Definitions:

Variable Overhead

Costs of production that vary with the level of output, such as utility expenses or raw material costs.

Direct Materials

Raw materials that are directly traceable to the production of a specific good or service.

Variable Overhead

Costs of operation that fluctuate with production volume, such as utilities for machinery.

Direct Labor-Hours

The cumulative amount of time employees spend specifically on the creation of goods or services.