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:

Verified
Correct Answer:
Verified
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