Which of the following theorems predicts that trade benefits the abundant factors of a country and harms the scarce factors?
A)The Stolper-Samuelson theorem.
B)The Rybczynski theorem.
C)The Heckscher-Ohlin theorem.
D)None of the above.

Question

Quizplus · Accepted Answer

This theorem states that in a two-factor, two-good model of international trade, if there is an increase in the price of a good, the real return to the factor used intensively in its production will rise, and the real return to the other factor will fall. Therefore, if trade allows a country to specialize in the production of the goods that use its abundant factor intensively, then that factor will benefit from trade, while the scarce factor will lose. This is because increased trade in a good that uses the abundant factor intensively will increase demand for that factor, driving up its price, while trade in a good that uses the scarce factor intensively will decrease demand for that factor, leading to a decline in its price.

Which of the Following Theorems Predicts That Trade Benefits the Abundant