Suppose that the United States and China each produce
Steel and cloth.In the HeckscherOhlin model, if the United
States enjoys a comparative advantage in steel production,
Then:

Question

Suppose that the United States and China each produce
Steel and cloth.In the Heckscher­Ohlin model, if the United
States enjoys a comparative advantage in steel production,
Then:

Quizplus · Accepted Answer

According to the Heckscher-Ohlin model, a country that has a comparative advantage in the production of one good also has a comparative disadvantage in the production of the other good. Therefore, if the United States has a comparative advantage in steel production, China must have a comparative advantage in cloth production. This does not necessarily mean that China has an absolute advantage in cloth production, so option A is incorrect. Similarly, the United States having a comparative advantage in steel production does not necessarily mean that it also has a comparative advantage in cloth production, so option B is incorrect. Option D is also incorrect since having a comparative advantage in one good does not necessarily mean having an absolute advantage in the same good.

Suppose That the United States and China Each Produce