Assume a Two-Country Two-Good Two-Input Model Where the Following Relationships

question 25

Multiple Choice

Assume a two-country two-good two-input model where the following relationships hold: (K/L) _U.S. > (K/L) _ROW
(K/L) _automobiles > (K/L) _shoes
Where (K/L) _U.S. is the capital-labor ratio in the United States, (K/L) _ROW is the capital-labor ratio in the Rest of the World, (K/L) _automobiles indicates the capital-labor ratio in the production of automobiles, and (K/L) _shoes indicates the capital-labor ratio in the production of shoes. Assume further that technology and tastes are the same in the United States and the Rest of the World. Which of the following statements is true?

• A)Production of automobiles is relatively labor-intensive.
• B)Production of shoes is relatively labor-intensive.
• C)Production of shoes is relatively cheaper in the U.S than the rest of the world.
• D)The laborers in the United States are less productive than the laborers in the Rest of the World.

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