Suppose that there are two factors, capital and land, and that the United States is relatively capital abundant while Canada is relatively land abundant. According to the HO model,
A) Canadian landowners should support Canada-U.S. free trade.
B) Canadian capitalists should oppose Canada-U.S. free trade.
C) U.S. capitalists should support Canada-U.S. free trade.
D) All of the above.

Question

Quizplus · Accepted Answer

According to the Heckscher-Ohlin (HO) model, countries will export goods that use their abundant factors intensively. Therefore, Canadian landowners and U.S. capitalists, who own the abundant factors in their respective countries, would benefit from free trade. Canadian capitalists, owning the scarce factor, would oppose it.

Suppose That There Are Two Factors, Capital and Land, and That