SCENARIO: CANADA AND THE UNITED STATES

Multiple Choice

SCENARIO: CANADA AND THE UNITED STATES
Canada and the United States produce computers and
Chemicals using labor and capital as the only inputs in
Production.The United States is capital abundant, and
Canada is labor abundant.Computer production is more
Labor intensive than chemical production in both countries.
Reference: Ref 4­7
(Scenario: Canada and the United States) What does the
Heckscher­Ohlin model predict will happen to wages and
Returns to capital after trade takes place between Canada
And the United States?

A) Wages of Canadian workers should rise.
B) Returns to capital in Canada should rise.
C) Wages of U.S.workers should rise.
D) Returns to capital in the United States should fall.