Economics • Economic BasicsMedium
In international trade theory, what does the 'Heckscher-Ohlin model' predict regarding trade patterns?
A. Countries will export goods that make intensive use of their abundant factors of production✓ Correct Answer
B. Trade is solely driven by technological differences between nations
C. Absolute labor productivity differences determine comparative advantage
D. Scale economies dictate all international trade flows
💡 Solution & Explanation
The Heckscher-Ohlin model predicts that international trade patterns are driven by differences in national factor endowments, leading countries to export goods utilizing abundant factors. Incorrect choices highlight technological differences or scale economies which belong to alternative trade theories. Bertil Ohlin and Eli Heckscher developed this foundational framework of international economics.
More Economics Economic Basics questions
- Consider the following statements regarding the inflation dynamics and Consumer Price Index (CPI) trends in…
- What does 'Moral Hazard' refer to in information economics?
- Which of the following theorems in welfare economics states that any Pareto efficient allocation can be…
- How does an increase in the Gross Capital Formation as a percentage of Gross State Domestic Product impact…
- Which of the following describes 'Price Elasticity of Supply'?