The Heckscher-Ohlin Model Assumes That There Are Two Countries, Each

question 73

Multiple Choice

The Heckscher-Ohlin model assumes that there are two countries, each of which produces two goods (say manufactures and agriculture) using labor and capital. Which of the following is an additional assumption of the Heckscher-Ohlin model?

• A) The ratio of the quantity of labor to the quantity of capital is different for each nation, resulting in different "endowments" of capital and labor.
• B) One nation has larger quantities of both capital and labor than the other country.
• C) Capital is a specific resource in producing manufactured goods, and labor is a specific resource in producing agricultural goods in each country.
• D) Labor and capital can move between countries.

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Definitions:

Agency Coupled With An Interest

An irrevocable agency agreement in which the agent is given an interest in the subject matter of the agency. Also called irrevocable agency.

Principal

The original sum of money borrowed in a loan, or the amount of the investment, not including the interest or profits.

Agency Relationship

A legal bond where one party, the agent, acts on behalf of another, the principal, in dealings with third parties.

Financial Year End

Financial year end is the completion of a one-year, or 12-month, accounting period; the date when companies must finalize their financial statements and report their financial performance.