H-O theory

In the 2-factor, 2 good Heckscher-Ohlin model, the two countries differ in

• Military capabilities

• labour productivities

• relative availabilities of factors of production

• tastes

Which of the following explains intra-industry trade.

• Wrong industrial classification

• Product differentiation

• Economics of scale

• All of the above

The fact that Germany both imports and exports cars is an example of:

• Intra Industry trade

• Interindustry trade

• Perfect competition.

• Imperfect competition.

Under Heckscher-Ohlin Model, international trade can lead to increases in:

• Consumer welfare only if output of both products is increased

• Output of both products and consumer welfare in both countries

• Total production of both products, but not consumer welfare in both countries

• Consumer welfare in both countries, but not toal production of both products

According to the theory of comparative advantage, which of the following is NOT a reason why countries trade?

• Costs are higher in one country than in another.

• Prices are lower in one country than in another.

• The productivity of labour differs across countries and industries.

• Exports give a country a political advantage over other countries that export less.

The H-O theorem looks to ______________ to explain trade flows

• Relative factor endowments

• The existence of trade barriers

• Acquired comparative advantage

• The differences in preference among consumers

The Heckscher-Ohlin approach to international trade provides important insights, in

• Gains from trade

• Effect of trade on production and consumption

• Effect of trade on the incomes of production factors

• All of the above

The quantity and quality of ___________ of a country are its factor endowments.

• Imports and exports

• Deficits and surpluses

• Land, labour, capital and natural resources

• Commodity money and fiat money

An autarky point is

• absence of trade/international trade

• trade without protectionism

• point of incomplete specialisation

• none of the above

Identify the assumptions of H-O model

• two countries, two commodities, two factors of production

• different technology in production

• commodities are produced under increasing returns to scale

• all resources are fully employed