In the Heckscher- Ohlin model,when two countries begin to trade with each other
A)all factors in both countries will gain from trade.
B)benefits from trade are evenly distributed between the two countries.
C)relative factor prices in the two countries diverge.
D)all factors in one country will gain,but there may be no gains in the other country.
E)the relative prices of traded goods in the two countries converge.

Question

Quizplus · Accepted Answer

In the Heckscher-Ohlin model, trade leads to the equalization of relative prices of traded goods between countries, as each country specializes in producing goods that use their abundant factors more intensively.

In the Heckscher- Ohlin Model,when Two Countries Begin to Trade