Which statement aligns with the Heckscher-Ohlin Theory?

Which statement aligns with the Heckscher-Ohlin Theory?

• A. A country's comparative advantage is determined by its relative factor endowments.
• B. A country's absolute productivity determines its trade.
• C. Trade is driven primarily by consumer preferences.
• D. Government policy alone decides trade patterns.

Answer: (C)

The Heckscher-Ohlin Theory explains trade patterns by the kinds of factors a country has in abundance—labor, capital, land, etc. A country will tend to export goods that use its abundant factors intensively and import goods that rely on the factors it lacks. So the statement that a country’s comparative advantage is determined by its relative factor endowments directly captures what the theory asserts. Other ideas describe different drivers than the factor-endowment explanation. Absolute productivity focuses on overall efficiency rather than the mix of factors, consumer preferences emphasize demand rather than the production-side basis for trade, and government policy alone ignores the market-driven role of factor endowments in shaping trade patterns.

The Heckscher-Ohlin Theory explains trade patterns by the kinds of factors a country has in abundance—labor, capital, land, etc. A country will tend to export goods that use its abundant factors intensively and import goods that rely on the factors it lacks. So the statement that a country’s comparative advantage is determined by its relative factor endowments directly captures what the theory asserts.

Other ideas describe different drivers than the factor-endowment explanation. Absolute productivity focuses on overall efficiency rather than the mix of factors, consumer preferences emphasize demand rather than the production-side basis for trade, and government policy alone ignores the market-driven role of factor endowments in shaping trade patterns.