Foreıgn Trade Deneme Sınavı Sorusu #1398572
Which of the following is a weakness of the simplifying assumption of Heckscher-Ohlin Theory that states ‘one of the countries is labor-abundant and the other one is capital-abundant’?
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In the real world, we deal with a number of countries and a variety of commodities produced with more than two commodities. |
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In the real world, it is not that easy to identify factor endowments of the countries. |
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In our world today, countries use different levels of technology and this difference itself constitutes the basis of their comparative advantage. |
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In our world today, most of the countries have been seeking to enjoy increasing returns to scale in international trade. |
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In the real world, it is really very hard to assume that international trade is free. |
The simplifying assumption of Heckscher-Ohlin Theory that states ‘one of the countries is labor-abundant and the other one is capital-abundant’ has a weakness because in the real world, it is not that easy to identify factor endowments of the countries. Since countries use more than two factors of production, it is impossible to find out the relative factor prices that are the determinants of the factor endowments without using factor price index.
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