Search & Filtering
What does the Heckscher–Ohlin theory postulate? Which force do Heckscher and Ohlin identify as the basic determinant of comparative advantage and trade?
If labor and capital can be substituted for each other in the production of both commodities, when can we say that one commodity is capital intensive and the other labor intensive?
What is meant by capital-abundant nation? What determines the shape of the production frontier of each nation?
What is meant by labor-intensive commodity? Capital-intensive commodity? Capital–labor ratio?
State the assumptions of the Heckscher–Ohlin theory. What is the meaning and importance of each of these assumptions?
In what ways does the Heckscher–Ohlin theory represent an extension of the trade model presented in the previous chapters? What did classical economists say on these matters?
It has often been said that OPEC (Organization of Petroleum Exporting Countries) operates as a cartel and is able to set petroleum prices by restricting supplies. Do you agree? Explain.
Suppose that the terms of trade of a nation improved from 100 to 110 over a given period of time.
(a) By how much did the terms of trade of its trade partner deteriorate? (b) In what sense can this be said to be unfavorable to the trade partner? Does this mean that the welfare of the trade partner has definitely declined?
Draw a figure showing the equilibrium point with trade for two nations that face constant opportunity costs.
Draw the offer curves for Nation 1 and Nation 2, showing that Nation 2 is a small nation that trades at the pre-trade relative commodity prices in Nation 1. How are the gains from trade distributed between the two nations? Why?
