Assume that Mexico is a labor-abundant country and capital is scarce. The result of international trade would be that:
A) both labor and capital would get more expensive.
B) labor would get more expensive.
C) capital would get more expensive.
D) both labor and capital would get cheaper.
E) factor prices would only change outside Mexico.

Question

Quizplus · Accepted Answer

In a labor-abundant country like Mexico, international trade would increase the demand for labor-intensive goods, making labor more expensive as it is the abundant factor.

Assume That Mexico Is a Labor-Abundant Country and Capital Is