Site navigation

Which one of the following assumptions is the most important assumption in the Heckscher - ohlin…

The Heckscher–Ohlin (H–O) theorem explains international trade through differences in countries' relative factor endowments and commodities' relative factor intensities (the…

Choose your answer

Which one of the following assumptions is the most important assumption in the Heckscher - ohlin theorem of international trade ?

Select one answer
Answer and explanation

Correct answer A

The Heckscher–Ohlin (H–O) theorem explains international trade through differences in countries' relative factor endowments and commodities' relative factor intensities (the factor-proportions theory). While the classical Ricardian model already assumes two countries, two commodities , and free trade / no tariff with only a single factor of production (labour), the defining and most essential structural assumption that distinguishes the Heckscher–Ohlin model is the Two-factor model (typically labour and capital). Without at least two factors of production, factor abundance and factor intensity cannot be defined.

Practice for these exams

  • UGC NET Economics

Related question papers

Related exam syllabi

Related questions in this topic