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

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.

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.

The Heckscher-Ohlin model assumes that there are two countries, each of which produces two goods(say manufactures and agriculture) using labor and capital. Which of the following is an additionalassumption of the Heckscher-Ohlin model?A. The ratio of the quantity of labor to the quantity of capital is different for each nation, resulting indifferent “endowments” of capital and labor.B. One nation has larger quantities of both capital and labor than the other country.C. Capital is a specific resource in producing manufactured goods, and labor is a specific resource inproducing agricultural goods in each country.D. Labor and capital can move between countries

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.

2. The Heckscher-Ohlin model differs from the Ricardian model of Comparative Advantage in that theformerA. has only two countries.B. has only two products.C. has two factors of production.D. has two production possibility frontiers (one for each country).E. None of the above.