Suppose that Ecuador is a labor-abundant country and Chile is a capital-abundant country. If Ecuador and Chile trade with one another then:
A) labor would tend to get more expensive in Ecuador.
B) capital would tend to get more expensive in Ecuador.
C) labor would tend to get more expensive in Chile.
D) capital would tend to get cheaper in Chile.
E) both labor and capital would get cheaper in Chile.

Question

Quizplus · Accepted Answer

According to the Heckscher-Ohlin theory, a country will export goods that use its abundant factor intensively. Ecuador, being labor-abundant, will export labor-intensive goods, increasing the demand for labor and making it more expensive.

Suppose That Ecuador Is a Labor-Abundant Country and Chile Is