Suppose that there are two factors, capital and land, and that the United States is relatively land endowed while the European Union is relatively capital-endowed. According to the Heckscher-Ohlin model
A) European landowners should support U.S.-European free trade.
B) the U.S. should compensate European countries once trade commences.
C) European capitalists should support U.S.-European free trade.
D) all landowners should support free trade.
E) all capitalists in both countries should support free trade.

Question

Quizplus · Accepted Answer

According to the Heckscher-Ohlin model, countries tend to export goods that make intensive use of their abundant factor(s) of production and import goods that make intensive use of the scarce factor(s) of production. In this case, since the U.S. is relatively land endowed and the European Union is relatively capital-endowed, the U.S. is likely to export land-intensive goods and import capital-intensive goods from the European Union, and vice versa. Therefore, European capitalists should support U.S.-European free trade as it would allow them to export their capital-intensive goods to the U.S. market, which is relatively abundant in land.

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