In the 2x2x2 Heckscher-Ohlin Analysis, If an Relatively Labor-Abundant Country

question 2

Multiple Choice

In the 2x2x2 Heckscher-Ohlin analysis, if an relatively labor-abundant country is opened To trade, then, as the movement to trade takes place, the capital/labor ratio used in the Country's export industry will __________ and the capital/labor ratio used in the Country's import-competing industry __________.

• A) increase; will decrease
• B) increase; also will increase
• C) decrease; also will decrease
• D) decrease; will increase

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Definitions:

Absolute Advantage

The ability of a party to produce a greater quantity of a good, product, or service than competitors, using the same amount of resources.

Banana Production

The cultivation, harvesting, and processing of bananas, typically for consumption as food or for use in various products.

Comparative Advantage

The ability of an individual or firm to produce a good or service at a lower opportunity cost than other producers.

Absolute Advantage

The capacity of a person, corporation, or nation to manufacture a product or provide a service at a lower unit cost than rival entities.