Which one of the following is NOT an assumption made in the standard 2x2x2 Heckscher-Ohlin analysis? A) The production function for a given good is the same in both countries. B) If a particular good is the relatively labor-intensive good at one set of relative factor Prices, then it is also the relatively labor-intensive good at any other set of relative Factor prices. C) A given relative commodity price ratio, say (P_X/P_Y)₁, can be associated with more than One relative factor price ratio, e.g., say with (w/r)₁ as well as with (w/r)₂. D) Tastes and preferences (i.e., the community indifference curve maps) are identical in the two countries.

Question

Quizplus · Accepted Answer

The Heckscher-Ohlin model assumes a one-to-one relationship between relative commodity prices and relative factor prices, contradicting choice C's implication of a many-to-one relationship.

Which One of the Following Is NOT an Assumption Made