In the 2-Factor, 2-Good Heckscher-Ohlin Model, the Production Possibility Frontier

question 65

Multiple Choice

In the 2-factor, 2-good Heckscher-Ohlin model, the production possibility frontier is kinked when

• A) there is no factor substitution in production.
• B) the opportunity cost of production is constant.
• C) there are unemployed factor resources.
• D) a country does not engage in trade.
• E) transportation costs are very high.

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Definitions:

Suppliers

Businesses or individuals that provide goods or services to another entity under terms specified in a contract.

Factors of Production

The resources utilized in the production of goods and services, traditionally categorized into land, labor, and capital.

Circular-Flow Model

A model that illustrates the movement of resources and money between firms and households in an economy.

Capital

Wealth in the form of money or other assets owned or employed in business by an individual, firm, or country.