Question

question 25

The factor endowment theory assumes

		Same tastes and preferences
		Factor inputs of uniform quality
		Same technology
		All of the above

question 26

Which of the following would least likely apply to the product life cycle theory?

		Calculators and computers
		Coal and crude oil
		Home movie cameras
		Office machinery

Answer 1

25. Option d is the answer.

• All of the above are assumptions of factor endowment theory.
• Factor endowment theory assumes that the countries can be represented using the same indifference curve. That is, the taste and preferences of both countries are same. They use same technology for producing the goods. The factor inputs are of uniform quality. The International trade will not have any restrictions and they are able to conduct limitless trades under factor endowment theory.

26. Option b is the answer.

• Coal and crude oil would least apply to the product life cycle theory.
• The Product life cycle involves the following steps:- introduction to a new product, growth of the product, maturity of the product, and finally the decline of the product. All these steps are dependent to the time on the market and it affects the overall sale of the product. Coal and crude oil are the products which serves as the raw materials for making many other products. Product life cycle theory is least applicable for them.