In the Heckscher-Ohlin Model, as Trade Occurs in a Capital-Abundant

question 7

Multiple Choice

In the Heckscher-Ohlin Model, as trade occurs in a capital-abundant country, increased imports will force domestic import-competing firms to decrease price and production. Labor and capital will move to exporting firms. What will then happen to wages and returns to capital?

• A) Both wages and returns to capital will increase.
• B) Both wages and returns to capital will decrease.
• C) Wages will increase and returns to capital will decrease.
• D) Wages will decrease and returns to capital will increase.

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Definitions:

Parental Investment Model

A theory proposing that the extent and type of investment parents make in their offspring affects the offspring's survival and reproductive success.

Natural Selection

A process in evolution by which organisms that are better adapted to their environment tend to survive and produce more offspring.

Fecundity

Refers to the ability to produce an abundance of offspring or new growth; fertility.

Reproductive Value

A concept in evolutionary biology that estimates the potential future reproductive output of an individual, considering factors such as age and health.