If Relatively Capital-Abundant Country a Opens Trade with Relatively Labor-Abundant

question 21

Multiple Choice

If relatively capital-abundant country A opens trade with relatively labor-abundant Country B and the trade takes place in accordance with the Heckscher-Ohlin theorem,What would be the consequence for factor prices (w/r) in the two countries?

• A) (w/r) rises in A and falls in B
• B) (w/r) rises in A and also rises in B
• C) (w/r) falls in A and rises in B
• D) (w/r) falls in A and also falls in B

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Definitions:

Materials Price Variance

The deviation from the standard to the real price of materials, calculated by multiplying this difference by the amount of materials bought.

Variable Overhead

Overhead costs that vary directly with the level of production or activity, such as electricity or material handling costs.

Direct Material

Raw materials that can be directly traced to the production of a specific product and are a significant component of its cost.

Variable Overhead

Costs of overhead that vary directly with the level of production, such as utilities or indirect materials.