Is it possible for an equilibrium that is consistent with purely competitive conditions to arise in an industry with positive scale economies? If so, explain how this could happen. If not, why not?
What will be an ideal response?
Question 2
Which of the following is NOT a proposition of the Heckscher-Ohlin model?
A) A country has a comparative advantage in the production of that commodity which uses more intensively the country's more abundant resource.
B) The effect of international trade is to tend to equalize factor prices between the trading nations.
C) If Mexico is an unskilled labor abundant country, then Mexico has a comparative advantage in the production of goods that use unskilled labor more intensively.
D) If the United States is a skilled labor abundant country, then the United States has a comparative advantage in the production of goods that use skilled labor more intensively.
E) Countries will completely specialize in the product in which they have a comparative advantage if free trade is allowed to occur.
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