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What factors of production is the Heckscher - Ohlin Theory based on? Please choose one: a
What factors of production is the Heckscher - Ohlin Theory based on? Please choose one: a. Entrepreneur-labor b. Labor-rent c. Capital-annuity D. Labor-capital to. Entrepreneur-annuity
? Country A has plenty of capital, country B is labor abundant, good Y is capital intensive, and good X is labor intensive; According to the Factor Equipment Theory in Foreign Trade Balance, which of the following is true? Please choose one: a. Country A shifts all its resources to Sector Y and country B shifts all of its resources to Sector X b. Country A shifts more resources to sector X than to the state of Otarchy, and country B to sector y compared to its state of Otarchy, c. Country A shifts all its resources to sector X and country B shifts all of its resources to sector Y. D. None to. Country A shifts more resources to sector Y than to the situation of Otarchy, and country B to sector X compared to the situation of Otarchy.
Expert Solution
1) Solution: labor - capital as inputs
Explanation: The Hecksher-Ohlin (H-O) model makes an assumption that labor and capital to be the inputs: and also takes into consideration the differences between nation’s initial resource endowments and differences among relative factor productivity
2) Solution: Option-1
Explanation: Country A is capital abundant and good Y is the capital intensive good; thus Country A can produce relatively more of good Y compared to Country B. They should focus on Y.
Country B is labor abundant and good X is the labor abundant thus Country B can produce relatively more of good X compared to Country A. They should focus on X.
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