Which model states that nations that are abundant in a factor will have a comparative advantage in a good whose production is intensive in that factor?

The response options are:

a) specific factors model

b) technological gap model

c) product cycle model

d) real business cycle model

The correct answer is: c) product cycle model.

Explanation:

Product cycle is the progression of a product through the four stages of its time in the market. The four stages of the life cycle are: Introduction, Growth, Maturity and Decline. All products have a life cycle and the time at each stage varies from product to product.

By maintaining a strong fixation in the four stages of a product's life cycle, a business can maximize return and realize when it is the best time to shed a product. Bypassing this can cost the business its money and take them to a limited product life cycle.

Heckscher–Ohlin model

Explanation:

The Heckscher–Ohlin model (H-O) was developed by Eli Heckscher and Bertil Ohlin and studies the comparative advantages that different countries possess when engaging in foreign trade.

These economists extended David Ricardo's model about trade and concluded that countries will engage in trading the products they produce using their abundant factors of production. E.g. countries with abundant land and labor will probably export agricultural products, while countries with abundant capital will export industrialized products.  

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