Which theory suggests that nations will develop comparative advantages based on their locally abundant factors?
A) Heckscher-Ohlin theory
B) Absolute advantage theory
C) Comparative advantage theory
D) Strategic trade theory

Question

Which theory suggests that nations will develop comparative advantages based on their locally abundant factors? 
A) Heckscher-Ohlin theory 
B) Absolute advantage theory 
C) Comparative advantage theory 
D) Strategic trade theory

Quizplus · Accepted Answer

The Heckscher-Ohlin theory suggests that nations will develop comparative advantages based on their locally abundant factors. These factors may be natural resources, land, labor, or capital. Countries will specialize in producing goods that use their abundant factors more intensively and trade with other countries to obtain goods that use their scarce factors more intensively. This theory emphasizes the importance of factor endowments in explaining international trade patterns.

Which Theory Suggests That Nations Will Develop Comparative Advantages Based