5. In the 2 factor, 2 good Heckscher-Ohlin model, the production possibility frontier is kinked whenA) a country does not engaged in tradeB) the opportunity cost of production is constantC) there is no factor substitution in productionD) there are unemployed factor resourcesE) transportation cost are very high.
Question
- In the 2 factor, 2 good Heckscher-Ohlin model, the production possibility frontier is kinked whenA) a country does not engaged in tradeB) the opportunity cost of production is constantC) there is no factor substitution in productionD) there are unemployed factor resourcesE) transportation cost are very high.
Solution
In the 2 factor, 2 good Heckscher-Ohlin model, the production possibility frontier is kinked when:
A) a country does not engage in trade B) the opportunity cost of production is constant C) there is no factor substitution in production D) there are unemployed factor resources E) transportation costs are very high.
To determine which option is correct, we need to analyze each statement one by one.
A) If a country does not engage in trade, it means that it is not importing or exporting goods. This would not cause the production possibility frontier to be kinked. Therefore, option A is not the correct answer.
B) If the opportunity cost of production is constant, it means that the trade-off between producing one good and the other remains the same. This would not cause the production possibility frontier to be kinked. Therefore, option B is not the correct answer.
C) If there is no factor substitution in production, it means that the factors of production cannot be used interchangeably. This could potentially cause the production possibility frontier to be kinked, as the country would not be able to efficiently allocate its resources. Therefore, option C could be the correct answer.
D) If there are unemployed factor resources, it means that there are unused resources available for production. This would not cause the production possibility frontier to be kinked. Therefore, option D is not the correct answer.
E) If transportation costs are very high, it could affect the ability to trade goods between countries. However, it would not directly cause the production possibility frontier to be kinked. Therefore, option E is not the correct answer.
Based on the analysis, the correct answer is option C) there is no factor substitution in production.
Similar Questions
In the 2-factor, 2 good Heckscher-Ohlin model, the country with a relative abundance of ________ willhave a production possibility frontier that is biased toward production of the ________ good.A) labor; labor intensiveB) labor; capital intensiveC) land; labor intensiveD) land; capital intensiveE) capital; land intensive
In the 2-factor, 2-good Heckscher-Ohlin model, an influx of workers from across the border wouldA) move the point of production along the production possibility curve.B) shift the production possibility curve outward, and increase the production of both goods.C) shift the production possibility curve outward and decrease the production of the labor-intensiveproduct.D) shift the production possibility curve outward and decrease the production of the capital-intensiveproduct.E) shift the possibility curve outward and displace preexisting labor.
Question 1.Assume 2-country (home and foreign) 2-factor (labor and capital), 2- good (clothing and software)Heckscher- Ohlin model. Clothing is relatively labor-intensive good. The maximum amount of clothinghome country can produce is 10 and the maximum amount of software home country can produce is 12.a. Draw the production possibility frontier for home country. (Have the quantity of clothing on thehorizontal axis.b. If the price of clothing is 2 and the price of software is 4, draw an Iso-value line which gives themaximum value of production in home country.c. Using the diagram from parts a) and b) find the production point in home country before trade.d. Redo parts (a), (b) and (c) when the price of software decreases to 2.
4. Which of the following is false (for the Heckscher-Ohlin model)?A. Differences in technologies could be the source of gains from trade.B. Some groups may gain and some may lose due to trade.C. Countries differ in the relative endowment of factor of productions.D. None of the above.
1. The following are all assumptions that must be accepted in order to apply the Heckscher-Ohlin Theory, except for one:A. countries differ in their endowments of factors of production.B. countries differ in their technologies.C. there are two factors of production.D. one product always requires more machines per worker in its production than does the other product.
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