The Heckscher-Ohlin model assumes that technology in each industry:
A) is the same in each nation-each firm has access to the most profitable technology.
B) has increasing returns so that one nation will be able to gain a comparative advantage by developing new technology.
C) is very different across the world-some nations have access to technology, whereas others do not.
D) is hard to access because R&D is very expensive especially for low-income nations.

Question

Quizplus · Accepted Answer

The Heckscher-Ohlin model assumes that technology is the same in each industry in each nation, meaning that each firm has access to the most profitable technology. This assumption is essential in the model because it allows for a simple comparison of factor endowments between nations. If technology were different across the world, this would create many complications in the model, and it would be difficult to determine which factors are the most important in determining a country's pattern of trade.

The Heckscher-Ohlin Model Assumes That Technology in Each Industry