One of the predictions of the Heckscher-Ohlin model is that ?
Correct answer: D. All of the above
- A. countries with different factor endowments but similar technologies and preferences will have a strong basis for trade with each other
- B. countries with tend to specialize but not completely in their comparative advantage good
- C. reciprocal demand leads to an equilibrium terms of trade by inducing change in both demand and supply
- D. All of the above
Explanation
Heckscher-Ohlin trade is based on differing factor endowments under similar technologies and preferences, and it generally predicts incomplete specialization. Trade equilibrium is reached through reciprocal demand and supply, so all three statements are consistent with the intended model summary.
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