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Suppose Country a Produces Two Goods, Good X and Good

Question 1

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Suppose country A produces two goods, good X and good Y. Production of good X involves an intensive use of highly skilled workers. However, good Y is a relatively capital-intensive good. If the country experiences a wave of immigration of highly skilled workers, investment in physical capital remaining unchanged, the Rybczynski theorem will predict that:


A) the production of good Y will contract.
B) the production of both the goods will expand in the same proportion.
C) the production of good X will contract.
D) the production of both the goods will increase, but increase in good X will be much higher than increase in good Y.

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