Find similarities and comparisons between the comparative
advantage and the Heckscher-Ohlin Model (Factor Proportions
Theory).
Present and explain at least one aspect to contrast these two
theories and one aspect of similarity between these two
theories.
Which of the following best explains why opportunity costs are
rising in the Heckscher-Ohlin model?
The factor endowments vary across countries.
All the factor inputs are not fully utilized in the production
of different commodities.
Different consumers have different tastes and preference
sets.
Different commodities use inputs in different proportions.
1. Assume that the assumptions of the Heckscher-Ohlin model are
holding. There are two inputs, labor and capital. There are two
goods, automobiles and clothing. Automobiles are capital-intensive,
and clothing is laborintensive. Assume that Canada is the
relatively capital abundant country. Answer the following questions
about the effect of trade on Canada:
a. As it begins to trade, which good will Canada export, and
which good will Canada import?
b. What will happen to the price of automobiles and the...