Hong Kong is relatively abundant in labor, while Canada is relatively abundant in capital.In both countries, the production of shirts is relatively more labor intensive than the production of computers.According to the factor-endowment theory, Hong Kong will have a(n)
A) absolute advantage in the production of shirts.
B) absolute advantage in the production of computers.
C) comparative advantage in the production of shirts.
D) comparative advantage in the production of computers.

Question

Quizplus · Accepted Answer

According to the factor-endowment theory, countries will have a comparative advantage in producing goods that intensively use the factor of production that is most abundant in that country. Since Hong Kong is relatively abundant in labor and the production of shirts is more labor-intensive, Hong Kong will have a comparative advantage in the production of shirts.

Hong Kong Is Relatively Abundant in Labor, While Canada Is