Solved

Computers Are Relatively Capital Intensive in Their Production, While Wool

Question 20

Multiple Choice

Computers are relatively capital intensive in their production, while wool is relatively labor intensive. Australia is relatively capital abundant and New Zealand is relatively labor abundant. According to the Heckscher-Ohlin theorem and the factor price equalization theorem:


A) we would expect the return to capital in Australia to rise relative to the return to labor in Australia.
B) we would expect the return to capital in Australia to fall relative to the return to labor in Australia.
C) we would expect the return to capital in Australia to equal the return to labor in Australia.
D) we would expect the return to capital in Australia to fall relative to the return to labor in New Zealand.

Correct Answer:

verifed

Verified

Unlock this answer now
Get Access to more Verified Answers free of charge

Related Questions