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 prices of
Computers or chemicals in the two countries?

A) The price of chemicals should rise in the United States.
B) .The price of chemicals should fall in the United States.
C) The price of computers should fall in Canada.
D) The price of chemicals should rise in Canada.