Canada and the United States Produce Computers and Chemicals Using

Multiple Choice

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. What does the Heckscher-Ohlin model predict will happen to wages and returns to capital after trade takes place between Canada and the United States?

A) Wages of Canadian workers should rise.
B) Returns to capital in Canada should rise.
C) Wages of U.S. workers should rise.
D) Returns to capital in the United States should fall.