Question
What is the core logic of the Heckscher-Ohlin model of trade?
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Answer
Countries export goods using their abundant factors intensively.
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Question
Why do countries gain from trade even if one country is more productive in every good?
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Answer
Specialization by comparative advantage raises total output and consumption.
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Question
How does absolute advantage differ from comparative advantage in trade theory?
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Answer
Absolute uses productivity levels; comparative uses lower opportunity cost.
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Question
When comparing which country should export a good, what cost must you compare?
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Answer
Opportunity cost, not absolute labor productivity.
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