In the Heckscher-Ohlin Model, as Trade Occurs in a Capital-Abundant

Multiple Choice

In the Heckscher-Ohlin Model, as trade occurs in a capital-abundant country, increased imports will force domestic import-competing firms to decrease price and production. Labor and capital will move to exporting firms. What will then happen to wages and returns to capital?

A) Both wages and returns to capital will increase.
B) Both wages and returns to capital will decrease.
C) Wages will increase and returns to capital will decrease.
D) Wages will decrease and returns to capital will increase.