The Leontief paradox illustrates a problem with this economic model, which would be at least partially resolved by the Linder hypothesis. For 10 points each:
[10h] Name this model in which the difference in factor endowments between two entities determines their respective comparative advantages.
ANSWER: Heckscher-Ohlin model [or H-O model; or 2x2x2 (“2 by 2 by 2” ) model]
[10e] The Heckscher-Ohlin model builds upon this economist’s classical theory of comparative advantage, which he illustrated with an example involving trading cloth and wine.
ANSWER: David Ricardo
[10m] While one of the assumptions in the Heckscher-Ohlin model is that output is directly proportional to input, this concept, where the cost per unit output decreases as output increases, exists for real-life companies.
ANSWER: economies of scale [reject “diseconomies of scale”]
<CT, Social Science>