Suppose That There Are Two Factors, Capital and Land, and That

question 20

Multiple Choice

Suppose that there are two factors, capital and land, and that the United States is relatively land endowed while the European Union is relatively capital-endowed. According to the Heckscher-Ohlin model

• A) European landowners should support U.S.-European free trade.
• B) the U.S. should compensate European countries once trade commences.
• C) European capitalists should support U.S.-European free trade.
• D) all landowners should support free trade.
• E) all capitalists in both countries should support free trade.

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Definitions:

Equilibrium Price

The price at which the quantity of a good or service demanded by consumers equals the quantity supplied by producers, resulting in market balance.

Immediate Effect

The instant impact or outcome that follows a specific action or decision, without significant delay.

Price Floor

A government- or authority-imposed minimum price that can be charged for a good or service, intended to prevent prices from falling too low.

Market Price

The actual selling price of a good or service in the marketplace, determined by supply and demand dynamics at any given time.