If Country a Is Well-Endowed with Natural Resources but a Small

question 16

Multiple Choice

If country A is well-endowed with natural resources but a small population while B is endowed with much labor but little land and few natural resources,then trade theory predicts that

• A) A and B will not trade with each other, as neither can produce enough goods to export
• B) A will gain more from trade than B
• C) The price of labor-intensive goods will fall in country B after trade
• D) Trade will occur, but wages will fall in country A
• E) Wages and land values will rise in both countries if they trade

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