If a country is well endowed with labor relative to capital, the factor-proportions theory predicts that it will:
A) export labor-intensive goods and import capital-intensive goods.
B) import labor-intensive goods and export capital-intensive goods.
C) neither import nor export capital-intensive goods.
D) neither import nor export labor-intensive goods.
E) the K/L ratio is high.

Question

Quizplus · Accepted Answer

The factor-proportions theory, also known as the Heckscher-Ohlin theory, suggests that countries will export goods that utilize their abundant factors of production and import goods that utilize their scarce factors. Therefore, a country with a relative abundance of labor compared to capital will export labor-intensive goods and import capital-intensive goods.

If a Country Is Well Endowed with Labor Relative to Capital