Which of the following is NOT a proposition of the Heckscher-Ohlin model? A.A co

Question

Which of the following is NOT a proposition of the Heckscher-Ohlin model?

A.A country has a comparative advantage in the production of that commodity which uses more intensively the country's more abundant resource. B.The effect of international trade is to tend to equalize factor prices between the trading nations. C.If the United States is a skilled labor abundant country, then the United States has a comparative advantage in the production of goods that use skilled labor more intensively. D.Countries will completely specialize in the product in which they have a comparative advantage if free trade is allowed to occur. E.If Mexico is an unskilled labor abundant country, then Mexico has a comparative advantage in the production of goods that use unskilled labor more intensively.

Explanation / Answer

The statement which is not a proposition of hecksher ohlin theorem:-

D) Countries will completely specialise in the poduct in which they have a comparative advantage if free trade is allowed to occur.

Hecksher ohlin theorem is based on the assumption that both the countries produce both the goods.Free trade leads to equalisation in their prices.It says nothing about a country specialising in any good.

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