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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Definitions:

Hispanic Persons

Individuals originating from Spanish-speaking countries, especially those in Latin America, and often pertaining to a demographic group in the United States.

Lives in Poverty

The state of individuals or groups who lack sufficient financial or material resources to meet their basic living needs.

Incidence of Poverty

The proportion or rate of individuals or households whose income falls below the poverty line, indicating their inability to afford basic needs.

White (Non-Hispanic) People

A demographic group identified by the U.S. Census Bureau referring to individuals who self-identify as white and not of Hispanic or Latino origin.