The difference between Ricardo\'s theory and the Heckscher-Ohlin theory is that

Question

The difference between Ricardo's theory and the Heckscher-Ohlin theory is that the Heckscher-Ohlin theory:

A. makes more simplifying assumptions.

B. cannot be subjected to empirical tests.

C. actually predicts trade patterns with greater accuracy.

D. argues that the pattern of international trade is determined by differences in national factor endowments.

E. suggests that trade is a positive-sum game in which all countries that participate realize economic gain

The main tenet of mercantilism was that it was in a country's best interests to maintain a trade surplus.

True or False

Explain.

In his book, "The Wealth of Nations," Adam Smith supported the mercantilist assumption that trade is a zero-sum game.

True or False

Explain

According to Ricardo's theory of comparative advantage, it makes sense for a country to specialize in the production of those goods that it produces most efficiently and to import goods that it produces less efficiently.

True or False

Explain

Explanation / Answer

The difference between Ricardo's theory and the Heckscher-Ohlin theory is that the Heckscher-Ohlin theory actually predicts trade patterns with greater accuracy. The correct answer is option (C).

The main tenet of mercantilism was that it was in a country's best interests to maintain a trade surplus. The statement is TRUE.

In his book, "The Wealth of Nations," Adam Smith supported the mercantilist assumption that trade is a zero-sum game. The statement is TRUE.

According to Ricardo's theory of comparative advantage, it makes sense for a country to specialize in the production of those goods that it produces most efficiently and to import goods that it produces less efficiently. The statement is TRUE.

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