Model Assumptions

Question 1

Heckcher-Ohlin Model

Answer 1

1. Labor and Capital flow freely between industries
2. The production of shoes is labor-intensive as compared with computer production, which is capital intensive
3. the amounts of labor and capital found in two countries differ
4. there is free international trade in goods
5. the technologies for producing shoes and computers are the same across countries
6. tastes are the same across countries

Question 2

Ricardo Model

Answer 2

1. Two countries (home and foreign)
2. Two goods (clothing and grain)
3. One factor (labor)
4. Labor requirements vary by country and good
5. Constant returns to scale production technologies
6. Perfect competition
7. no differences in taste

Question 3

Ricardo-Viner/ Specific Factors

Answer 3

1. Two goods (Farming and Machinery)
   2.Labor is mobile: L = LF + LM
   K is immobile: KF for farming and KM for machinery
2. Perfect competition
3. Tastes are the same
4. Focus on the domestic economy (how does us econ adjust when factors are fixed)