Author Question: Explain why positive economies of scale in one (of two) sectors may establish a comparative ... (Read 58 times)

Mr3Hunna

  • Hero Member
  • *****
  • Posts: 536
Explain why positive economies of scale in one (of two) sectors may establish a comparative advantage for the large (as compared to the small) country in the production of the commodity which exhibits positive scale economies.
 
  What will be an ideal response?

Question 2

The HO theorem states that a country will have comparative advantage in the good whose production is relatively intensive in the ________ with which the country is relatively abundant.
 
  A) tastes
  B) technology
  C) factor
  D) opportunity costs



chloejackso

  • Sr. Member
  • ****
  • Posts: 316
Answer to Question 1

In the case of the H-O model, the actual size of the country is irrelevant in the determination of the direction of trade (though it may affect the equilibrium terms of trade). When positive scale economies apply to the production of one product, the country that can devote more resources (in absolute terms) will be able to sell that product cheaper, and therefore will be more likely to gain a revealed comparative advantage in that product. This will be the country with more factors (both labor and capital)-the larger country.

Answer to Question 2

C



Related Topics

Need homework help now?

Ask unlimited questions for free

Ask a Question
 

Did you know?

The oldest recorded age was 122. Madame Jeanne Calment was born in France in 1875 and died in 1997. She was a vegetarian and loved olive oil, port wine, and chocolate.

Did you know?

IgA antibodies protect body surfaces exposed to outside foreign substances. IgG antibodies are found in all body fluids. IgM antibodies are the first type of antibody made in response to an infection. IgE antibody levels are often high in people with allergies. IgD antibodies are found in tissues lining the abdomen and chest.

Did you know?

More than 20 million Americans cite use of marijuana within the past 30 days, according to the National Survey on Drug Use and Health (NSDUH). More than 8 million admit to using it almost every day.

Did you know?

About 600,000 particles of skin are shed every hour by each human. If you live to age 70 years, you have shed 105 pounds of dead skin.

Did you know?

More than 30% of American adults, and about 12% of children utilize health care approaches that were developed outside of conventional medicine.

For a complete list of videos, visit our video library