Suppose that Brazil is capital abundant and Chile is natural resource abundant.If timber is natural resource intensive and computers are capital intensive,then according to the Stolper-Samuelson Theorem,the incomes of the owners of ________ are likely to rise in Brazil after trade with Chile begins.
A)capital
B)labor
C)natural resources
D)It is impossible to determine which will be favored.

Question

Quizplus · Accepted Answer

According to the Stolper-Samuelson Theorem, in a situation where a capital-abundant country trades with a natural resource-abundant country, the owners of the factor of production that is abundant in the home country will see an increase in their incomes. In this case, Brazil is capital abundant and Chile is natural resource abundant. Therefore, after trade with Chile begins, the incomes of the owners of capital in Brazil are likely to rise.

Suppose That Brazil Is Capital Abundant and Chile Is Natural