Essay
Suppose Australia, a land (K)-abundant country, and Sri Lanka, a labor(L)-abundant country, both produce labor and land intensive goods with the same technology.
-Refer to above figure. Imagine that the relative capital abundance of Australia was so much greater than that of Sri Lanka, that we would have to locate Australia far to the right on the K/L axis. If this were so far to the right that there was no area of overlap on the w/r axis, then what product would Australia export?
Which product will each of the trade partners export?
Will the relative wages as calculated now be the same or different in both Australia and Sri Lanka?
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Australia would still export food. As a ...View Answer
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