In the 2-factor, 2-good Heckscher-Ohlin model, the production possibility frontier is kinked when A) there is no factor substitution in production

Economics Nov 07, 2020

In the 2-factor, 2-good Heckscher-Ohlin model, the production possibility frontier is kinked when A) there is no factor substitution in production. B) the opportunity cost of production is constant. C) there are unemployed factor resources. D) a country does not engage in trade. E) transportation costs are very high.

Expert Solution

In the heckscher ohline model the production possibility frontier is kinked when there is no factor substitution in thr production. In heckshcer ohline model there is mobility of labour and capital in industries within the country but there is no mobility of labour and capital in between countrys. This will make no factor substitution in the country.

So here the answer is there is 'no factor substitution in the production'.

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