The assumption of diminishing returns in the Heckscher- Ohlin model means that,unlike in the Ricardian model,it is likely that
A)countries will not be fully specialized in one product.
B)global production will decrease under trade.
C)countries will benefit from free international trade.
D)countries will consume outside their production possibility frontier.
E)comparative advantage will not determine the direction of trade.

Question

Quizplus · Accepted Answer

In the Heckscher-Ohlin model, diminishing returns imply that countries will not fully specialize in one product because as production of a good increases, the opportunity cost of producing additional units rises, leading to partial specialization.

The Assumption of Diminishing Returns in the Heckscher- Ohlin Model