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:
A)China must have an absolute advantage in cloth production.
B)the United States will also have a comparative advantage in cloth production.
C)China must have a comparative advantage in cloth production.
D)the United States must have an absolute advantage in steel production.

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:
A)China must have an absolute advantage in cloth production.
B)the United States will also have a comparative advantage in cloth production.
C)China must have a comparative advantage in cloth production.
D)the United States must have an absolute advantage in steel production.

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