Faculty of Commerce Third grade

English Section Dr. Nanis Fekry

International Economics
Tutorial Three
 Choose the correct answer:
1. In the Heckscher-Ohlin model, the two countries differ in:
(a) Technology of production.
(b) Tastes.
(c) Relative availability of factors of production.
(d) Factor mobility.

2. Suppose that there are two factors, capital and land, and that the United States is
relatively land endowed while the European Union is relatively capital-endowed.
According to the Heckscher-Ohlin model,
(a) European landowners should support US-European free trade.
(b) European capitalists should support US-European free trade.
(c) All capitalists in both countries should support free trade.
(d) All landowners should support free trade.

3. Assume that only two countries, A and B, exist. Consider the following data:
Factor Endowments A B
Labor force 45 20
Capital stock 15 10

If good S is capital intensive, then following the Heckscher-Ohlin Theory,

(a) Country A will export good S.
(b) Both countries will export good S.
(c) Country B will export good S.
(d) Trade will not occur between the two countries.
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 4. According to Heckscher-Ohlin model, the source of comparative advantage is a
country's
(a) Technology.
(b) Human Capital.
(c) Factor Endowments.
(d) Both (a) & (c).

5. The Heckscher-Ohlin model differs from the Ricardian model of Comparative

Advantage in that it:
(a) Has only two countries.
(b) Has two production possibility frontiers (one for each country).
(c) Has two factors of production.
(d) Has only two products.

6. The following are all assumptions that must be accepted in order to apply the
Heckscher- Ohlin Theory, except for one:
(a) Countries differ in their endowments of factors of production.
(b) Countries differ in their technologies.
(c) There are two factors of production.
(d) Production is subject to constant returns to scale.
7. In the Heckscher- Ohlin Theory, a change from autarky to trade will benefit the
owners of
(a) Capital.
(b) The relatively abundant factor of production.
(c) Labor.
(d) The relatively scarce factor of production.

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