What is the Heckscher-Ohlin theorem? Using the case studies in the chapter on U.S. trade with China describe the theory and the resulting trade patterns that would support it
What will be an ideal response?
I would expect my students to address the following:
? A clear statement of the HO Theorem along the lines that nations differ in their endowments of factors of production, products differ in how intensively they use various factors of production, so a nation that has a relative abundance in a specific factor of production compared to its trading partner will have a comparative advantage in products that use that factor of production more intensively.
? The U.S. would have an abundance of capital and skilled labor and China unskilled labor. The text offers data that supports this.
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Which of the following always lowers the equilibrium price?
A) an increase in both demand and supply B) a decrease in both demand and supply C) an increase in demand combined with a decrease in supply D) a decrease in demand combined with an increase in supply
Refer to Table 2-12. What is Honduras's opportunity cost of producing one sailboat?
A) 1/5 of a canoe B) 1.5 canoes C) 4 canoes D) 5 canoes