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Assume a Two-Country Two-Good Two-Input Model Where the Following Relationships

Question 5

Multiple Choice

Assume a two-country two-good two-input model where the following relationships hold: (K/L) U.S. > (K/L) ROW
(K/L) automobiles > (K/L) shoes
Where (K/L) U.S. is the capital-labor ratio in the United States, (K/L) ROW is the capital-labor ratio in the Rest of the World, (K/L) automobiles indicates the capital-labor ratio in the production of automobiles, and (K/L) shoes indicates the capital-labor ratio in the production of shoes. Assume further that technology and tastes are the same in the United States and the Rest of the World. This information indicates that the United States:


A) is a relatively capital-scarce country.
B) has a scarcity of land.
C) is a relatively land abundant country.
D) is a relatively capital-abundant country.

Correct Answer:

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