Posted: January 25th, 2017
According to the 2-factor, 2 good Heckscher-Ohlin model, an influx of workers from across the border to Saudi Arabia would: a. move the point of production along the Saudi production possibility curve. b. shift the Saudi production possibility curve outward, and increase the production of both goods. c. shift the Saudi production possibility curve outward and decrease the production of the labor-intensive product. d. shift the Saudi production possibility curve outward and decrease the production of the capital-intensive product. 2. According to the Heckscher-Ohlin model, the source of comparative advantage is a country’s: a. technology. b. advertising. c. human capital. d. factor endowments. 3. The Hechscher-Ohlin model states that a country will have a comparative advantage in the good or service whose production is relatively intensive in the ________ with which the country is relatively abundant. a. tastes. b. technology. c. factor of production. d. opportunity cost. Countries Saudi Arabia Sudan Arable Land 60 40 Capital Stock 30 10 4. Refer to the table above. If medicine is a capital intensive good, then following the Heckscher-Ohlin Theory, a. Saudi Arabia will export medicine. b. Sudan will export medicine. c. Both countries will export medicine. d. trade will not occur between these two countries. 5. If Saudi Arabia has more capital per worker, and Egypt has more land per worker, then if trade were to open up between these two countries, a. the real income of capital owners in Saudi Arabia would rise. International Economics Page 2 of 2 b. the real income of labor in Saudi Arabia would clearly rise. c. the real income of labor in Egypt would clearly rise. d. the real income of landowners in Egypt would fall. Question # …. Hickscher-Ohlin model “A country can either be land-abundant or capital abundant but cannot simultaneously be both land-abundant and capital abundant.” Discuss with a numerical example. (Hints: Consider two countries like Saudi Arabia and Brazil. Let T stands for land and K for capital. Consider the Hickscher-Ohlin model to answer this question. Show the different factor ratios and your conclusion).
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