Topic 4: The Two Factor H-O (Heckscher-Ohlin) Model

Question 1

In addition to differences in labour productivity, trade occurs due to differences in ………. across countries

Answer 1

resources

Question 2

the HO model is a long-run model because:

Answer 2

all factors of
production can move between the industries

Question 3

The HO model explains:

Answer 3

international differences in comparative
advantage (and thus trade patterns) in terms of differences in factor
endowments

Question 4

The Heckscher–Ohlin (HO) model assumes that trade occurs
because countries have ………. ………….

Answer 4

different endowments

Question 5

Like the Ricardian model, the Heckscher-Ohlin model
predicts a ……….. of relative prices with trade

Answer 5

convergence