The Assumption of Diminishing Returns in the Heckscher-Ohlin Model Means

question 6

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) countries will benefit from free international trade.
• C) countries will consume outside their production possibility frontier.
• D) comparative advantage will not determine the direction of trade.
• E) global production will decrease under trade.

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Form 941-V

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