Both the theory of comparative advantage in production and the H-O theory provide ______ as a basis for international trade.

Question

Quizplus · Accepted Answer

Both the theory of comparative advantage in production and the H-O theory provide factor endowments as a basis for international trade. The theory of comparative advantage states that countries should specialize in producing the goods that they can produce most efficiently, based on their factor endowments. The H-O theory builds on this by emphasizing that countries will export goods that use their abundant factors of production and import goods that require their scarce factors of production. Therefore, both theories are based on the concept of factor endowments driving international trade.

Both the Theory of Comparative Advantage in Production and the H-O