Question

True or False

1.         According to Heckscher-Ohlin theory, comparative advantage depends on relative differences in labour productivity.

2.         According to the factor-endowment theory, a country will import that good which intensively uses the country’s relatively abundant resource.

3.         According to the factor-price equalization theory, international trade encourages the elimination of relative resource prices between nations.

4.         According to Staffan Linder, the factor-endowment theory is useful in explaining trade patterns in manufactured goods, but not primary products.

5.         According to the product-life-cycle theory, the last stage of a product's trade cycle is when it becomes an import-competing good.

Answer 1

1) FALSE - Because, According to the Ricardian theory, comparative advantage depends on relative differences in labour productivity. Not of Heckscher - ohlin thoery.

2) FALSE - According to Factor endowment theory , country will not import that good which intensively uses the country’s relatively abundance resources. This theory highlights the relative abundance of nations resourcesas the key factor underlying the comparative advantage

3) TRUE - According to Factor price equalisation theory, international trade results in the relative differences in resources prices between nations being eliminated.

4) FALSE - According to staffan Linder, The Factor endowment theory is use ful in explaining the trade patterns in both the Goods

5) TRUE - According to product life cycle theory, the last stage of the product’s trade cycle is Whne it becomes an Import competing good.