What does the HO model predict will happen to the real
Returns to factors of production after trade occurs?
A)Labor and capital must be used together in production, and there is no room for competition for remuneration.
B)Capital owners always get the "gains from trade."
C)Resources used intensively in export industries (such as labor in China and capital in the United States) will see an
Increase in their returns, whereas the resources used
Intensively in importcompeting industries will see a
Decline in their return.
D)Poor nations will always get the least returns to their factors of production.

Question

What does the HO model predict will happen to the real
Returns to factors of production after trade occurs?
A)Labor and capital must be used together in production, and there is no room for competition for remuneration.
B)Capital owners always get the "gains from trade."
C)Resources used intensively in export industries (such as labor in China and capital in the United States) will see an
Increase in their returns, whereas the resources used
Intensively in import­competing industries will see a
Decline in their return.
D)Poor nations will always get the least returns to their factors of production.

Quizplus · Accepted Answer

The HO model predicts that resources used intensively in export industries will see an increase in their returns, whereas the resources used intensively in import-competing industries will see a decline in their return. This is because there will be increased demand for the factors of production used in export industries, driving up their prices, while the demand for the factors used in import-competing industries will decrease, lowering their prices.

What Does the HO Model Predict Will Happen to the Real