Question

question 21

Which of the following explains comparative advantage as the result of differences in countries' relative abundance of various resources?

		The overlapping demand theory
		The product life cycle theory
		The Heckscher-Ohlin theory
		The specific factor theory

question 22

According to the Heckscher-Ohlin theory:

		A nation will export the commodity in which it has an absolute advantage.
		A nation will export the commodity in the production of which a great deal of its relatively abundant and cheap factor is used
		A nation will export the commodity for which foreign demand for the good is similar to domestic demand for the same good.
		Factor prices across ccountries should equalize over time

Answer 1

Question 21

Which of the following explains comparative advantage as the result of differences in countries' relative abundance of various resources?

The Heckscher-Ohlin theory

Explanation: Heckscher-Ohlin theory suggests abundance in factors of production is key reason for export, if country is capital abundant, then will export capital intensive goods and if country is labour abundant then it will export labour intensive good

Question 22

According to the Heckscher-Ohlin theory: A nation will export the commodity in the production of which a great deal of its relatively abundant and cheap factor is used