chapter 4

Question 1

What is the primary objective of the Heckscher-Ohlin model in comparison to the comparative advantage model?

a) It simplifies the concept of comparative advantage.
b) It elaborates on why countries tend to have a comparative advantage.
c) It opposes the principles of comparative advantage.
d) It concentrates on the short-term impacts of trade.

Answer 1

B

Question 2

What concept does the Heckscher-Ohlin Model propose regarding a country’s comparative advantage in production?

a) Countries excel in producing products that require a wide range of resources.
b) Countries have a comparative advantage in producing products that require resources abundant within their borders.
c) Countries have a comparative advantage in producing products that require resources scarce within their borders.
d) Countries have a comparative advantage in producing products that are labor-intensive.

Answer 2

B

Question 3

According to the Heckscher-Ohlin model, what is the implication of a country having abundant resources?

a) Abundant resources are typically more expensive compared to other countries.
b) Abundant resources should be available at a relatively lower cost compared to other countries.
c) Abundant resources are unavailable for production.
d) Abundant resources are irrelevant for determining comparative advantage.

Answer 3

B

Question 4

What does the Heckscher-Ohlin model suggest a country should do with products that intensively use its abundant resources?

a) Import them to conserve domestic resources.
b) Subsidize their production to encourage consumption.
c) Export them to capitalize on the abundance of resources.
d) Restrict their production to avoid resource depletion.

Answer 4

C

Question 5

According to the Heckscher-Ohlin model, what is likely to be the case for countries regarding products that require resources scarce within their borders?

a) They should prioritize production of such products to diversify their economy.
b) They should import such products to avoid resource depletion.
c) They should subsidize the production of such products to make them competitive.
d) They are likely to have a comparative disadvantage in producing such products.

Answer 5

D

Question 6

What are the key assumptions of the increasing costs model, a part of the comparative advantage model?

a) Production costs decrease with each additional unit produced.
b) Production costs remain constant regardless of the quantity produced.
c) The marginal cost of producing each additional unit of the product increases.
d) The marginal cost of producing each additional unit of the product decreases.

Answer 6

C

Question 7

What effect does the assumption of increasing production costs have on the production possibility curve?

a) It remains linear.
b) It becomes concave.
c) It becomes convex.
d) It remains unchanged.

Answer 7

C

Question 8

What do community indifference curves represent in the context of the increasing costs model?

a) They represent the preferences of individuals within society.
b) They represent the preferences of society toward consuming products.
c) They represent the production possibilities of society.
d) They represent the costs of production for society.

Answer 8

B

Question 9

What does it mean when society is equally happy consuming any combination of products on an indifference curve?

a) Society prefers certain combinations of products over others.
b) Society is indifferent between different combinations of products on the curve.
c) Society is perfectly satisfied with consuming only one product.
d) Society is unhappy with consuming any combination of products on the curve.

Answer 9

B

Question 10

What does the principle “more is better” signify in relation to indifference curves?

a) Society prefers fewer goods over more goods.
b) Society prefers combinations of products on indifference curves that are lower and to the left.
c) Society prefers combinations of products on indifference curves that are higher and to the right.
d) Society has no preference between different combinations of products on indifference curves.

Answer 10

C

Question 11

What does the slope of the indifference curve indicate regarding society’s preferences?

a) It indicates how much society values the product on the horizontal axis.
b) It indicates how much society values the product on the vertical axis.
c) It indicates the rate at which society is willing to trade one product for another.
d) It indicates the rate at which society’s happiness changes as consumption of one product increases.

Answer 11

B

Question 12

The Heckscher-Ohlin (HO) theorem explains patterns of trade between countries
using:
a. economies of scale.
b. monopoly power in the industry.
c. abundance or scarcity of resources.
d. tariffs and quota.

Answer 12

C

Question 13

Assume a two-country, two-good, and two-input model. Let the two countries in this model
be the United States and the Rest of the World and the two goods being produced by each of
the countries be steel and wheat. The two factors of production used in producing the goods
in each country are capital and land. If the United States is capital-abundant and steel
production is capital-intensive, the Heckscher-Ohlin model would predict that the United
States would:
a. export steel and import wheat.
b. export wheat and import steel.
c. import both the goods from the rest of the world.
d. export both the goods to the rest of the world

Answer 13

A

Question 14

Assume a two-country, two-good, and two inputs model. Let the two countries in this model
be the United States and the Rest of the World and the two goods being produced by each of
the countries be steel and wheat. The two factors of production used in producing the goods
in each country are capital and land. If the United States is capital-abundant and steel
production is capital-intensive, the Heckscher-Ohlin model would predict that the Rest of the
World would:
a. export steel and import wheat.
b. export wheat and import steel.
c. import both the goods from the United States.
d. export both the goods to the United States.

Answer 14

B

Question 15

28. If the United States is relatively capital-abundant, it is because:
    a. capital costs more in the United States than in the rest of the world.
    b. the United States has more capital than the rest of the world.
    c. the United States produces and exports primary products to the rest of the world and
    imports manufactured goods.
    d. the ratio of capital to other inputs is greater in the United States than that in the rest of
    the world.

Answer 15

D

Question 16

Which of the following theories correctly predicts that a country will export those goods that
use the country’s abundant factor(s) intensively and import those goods that use the country’s
scarce factor(s)?
a. The theory of absolute advantage
b. The theory of comparative advantage
c. The Heckscher-Ohlin theory
d. The theory of purchasing power parity

Answer 16

C

Question 17

China has 20% of the world’s population but only 10% of the world’s farmable land. Which
of the following will be predicted by the Heckscher-Ohlin theory, if China begins to trade
with other countries?
a. China will export land-intensive goods like wheat and import labor-intensive goods like
clothing.
b. China will shift resources into the production of agricultural goods and away from
manufactured goods.
c. China will shift resources from the production of agricultural goods to the production of
labor-intensive goods.
d. China will export capital-intensive goods like automobiles and import labor-intensive
goods like clothing.

Answer 17

C