The Heckscher-Ohlin theory explains comparative advantage as the result of diffe
ID: 1140773 • Letter: T
Question
The Heckscher-Ohlin theory explains comparative advantage as the result of differences in countries a. Economies of large-scale production c. Relative costs of labor 7. b. d. Relative abundance of various resources Research and development According to the factor endowment model, countries heavily endowed with land will: a. b. c. d. 8. Devote excessive amounts of resources to agricultural production Devote insufficient amounts of resources to agricultural production Export products that are land-intensive Import products that are land-intensive . The simultaneous import and export of computers by Germany is an example of a. Intraindustry trade c. Perfect competition b. d. Interindustry trade Imperfect competition 0. Linder's theory of overlapping demand provides an explanation of Product life cycle theory ecnis of large scale production. Factor endowment model Intraindustry trade a.Explanation / Answer
Ans.
7) b.relative abundance of various resources.
According to Heckscher-Ohlin theory there is comparative advantage due to differences in relative abundance of resources in countries.That is countries have different relative abundance of factors of production. Suppose there are two countries A and B. If capital is cheap in country A then country is abundant in capital and if labour cheap is in country B then country is abundant in labour.Thus , country A has comparative advantage in exporting capital intensive goods and country B exports labour intensive goods.
8) c. export products that are land - intensive
According to factor endowment model , the countries heavily endowed with land will export products that are land intensive.The factor endowment model is associated with international trade by Hecksher Ohlin. The model states that the differences in cost of production is due to differences in supply of factor endowments.Here, the countries are abundantly endowed with land so there will be export of land intensive goods.
9) a. intraindustry trade
Intraindustry trade is defined as exchange of similar products belonging to the same industry. Here, by Germany there is exchange of computers simaltaneously , so there is intraindustry trade. Whereas, in interindustry trade countires are involved according to there comparative advantage for the products.
10) d. intraindustry trade
Linder's theory of overlapping demand provides an explanation of intraindustry trade. Where countries import and export the products to the same industry.However, Linder's theory of overlapping demand asserts that for manufactured goods, countries with similar demand conditions will trade intensively with each other.
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