The assumption of increasing opportunity costs in the HO model increases the likelihood that
A)there will be incomplete specialization in production after trade begins.
B)countries will be better off with free international trade.
C)countries will maximize their standards of living from free international trade.
D)All of the above.

Question

Quizplus · Accepted Answer

In the Heckscher-Ohlin (HO) model, increasing opportunity costs imply that as a country specializes more in producing a good, the cost of producing additional units increases. This makes it less likely for a country to completely specialize in one good, leading to incomplete specialization.

The Assumption of Increasing Opportunity Costs in the HO Model