Question

15. Many of the common items that you use everyday are manufactured in Asia. If the H-O model applies, what would account for this?

The US has used its military power to oppress the Asians and force them to work for low wages

Asian countries are abundant in low-skilled labor, and so items can be manufactured at lower opportunity cost.

Global corporations have located their manufacturing operations in Asia in their attempt to impoverish the people of Asia.

Asian countries do not enjoy a comparative advantage in any economic activity, so they end up being exploited by wealthy countries.

Answer 1

The correct answer is Option (B) Asian countries are abundant in low-skilled labor, and so items can be manufactured at lower opportunity cost

Explanation -

The basis of Heckscher-Ohlin model is that countries export what they can produce efficiently and in plenty. Importantly, "labor" is the "factor of production" that is available in plenty in Asian countries and this is in sync with the Heckscher-Ohlin model.

As compared to the Western countries or the developed countries, the cost of labor is lower in Asia and therefore the opportunity cost of production of everyday use items is lower in Asia. In other words, Asia has a "comparative advantage."