Which of the following is true of the Heckscher-Ohlin theory? Multiple Choice

a. It argues that it is in a country's best interests to maintain a trade surplus.

b. It is a good predictor of real-world international trade patterns. Viewed from an Asian or European perspective, its main argument seems ethnocentric and increasingly dated.

c. It argues that the pattern of international trade is determined by differences in factor endowments.

d. It makes more simplifying assumptions than the theory of comparative advantage.

Question

Sanaa Callahan

Business

18 February, 05:49

Which of the following is true of the Heckscher-Ohlin theory? Multiple Choice

a. It argues that it is in a country's best interests to maintain a trade surplus.

b. It is a good predictor of real-world international trade patterns. Viewed from an Asian or European perspective, its main argument seems ethnocentric and increasingly dated.

c. It argues that the pattern of international trade is determined by differences in factor endowments.

d. It makes more simplifying assumptions than the theory of comparative advantage.

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Answers (1)

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Montgomery · Answer 1

Answer: Option (C) is correct.

Explanation:

The Heckscher-Ohlin theory is based on the cause of comparative advantage and explains that it is the difference in the factor endowments among the countries that is the main cause of international trade.

Heckscher-Ohlin theory says that a country exports the commodity whose production requires the intensive use of nation's relatively abundant and cheap factor and a country imports the commodity whose production requires intensive use of nation's relatively scarce and expensive factor.