According to the Rybczynski theorem,at constant world prices,if a country experiences a gain in its capital stock it will produce
A)more of the capital intensive good and less of the labor intensive good.
B)more of both goods.
C)less of the capital intensive good and more of the labor intensive good.
D)less of both goods.

Question

Quizplus · Accepted Answer

The Rybczynski theorem states that an increase in a country's capital stock will cause an increase in the production of the capital-intensive good and a decrease in the production of the labor-intensive good. This is because an increase in capital allows for more efficient production of the capital-intensive good, while the labor-intensive good becomes relatively more expensive due to a decrease in the labor force being allocated towards it. Therefore, choice A is the correct answer.

According to the Rybczynski Theorem,at Constant World Prices,if a Country