Why is the PPF bowed out in the HeckscherOhlin model?
A)Capital is specific to the production of one good.
B)Labor is specific to the production of the other good.
C)There are increasing opportunity costs of producing each good.
D)Labor is not perfectly mobile between the production of the two goods.

Question

Why is the PPF bowed out in the Heckscher­Ohlin model?
A)Capital is specific to the production of one good.
B)Labor is specific to the production of the other good.
C)There are increasing opportunity costs of producing each good.
D)Labor is not perfectly mobile between the production of the two goods.

Quizplus · Accepted Answer

The bowed out shape of the PPF in the Heckscher-Ohlin model is due to increasing opportunity costs of producing each good. This means that as a country produces more of one good, it must give up increasing amounts of the other good. This is because the factors of production (specifically, labor and capital) are not perfectly mobile between the production of the two goods. Therefore, the cost of producing one good in terms of the other good increases, leading to a bowed out PPF.

Why Is the PPF Bowed Out in the Heckscher­Ohlin Model

Why Is the PPF Bowed Out in the HeckscherOhlin Model