Country A is relatively land-abundant and wheat is relatively land-intensive. Given the assumptions of the Heckscher-Ohlin model, the opening of trade in this country will cause the domestic price of wheat to:
A)fall.
B)rise.
C)remain unaffected.
D)at first rise but then fall back to its original level.

Question

Quizplus · Accepted Answer

According to the Heckscher-Ohlin model, a country will export goods that intensively use its abundant factor of production. Since Country A is land-abundant and wheat is land-intensive, opening trade will increase the demand for wheat, causing its domestic price to rise.

Country a Is Relatively Land-Abundant and Wheat Is Relatively Land-Intensive