Assume That a Capital-Abundant Country Trades Only Two Goods with the Rest

question 41

Multiple Choice

Assume that a capital-abundant country trades only two goods with the rest of the world, medical equipment and corn. Medical equipment is relatively capital-intensive. According to the Rybczynski theorem, the relative price of the goods remaining unchanged, an increase in the country's endowment of capital will cause the output of medical equipment to _____ and the output of corn to _____.

• A)rise; fall
• B)fall; rise
• C)rise; remain the same
• D)remain the same; fall