In general, a labor-abundant country (such as China) tends to specialize in labor- intensive industry and export labor-intensive products, and imports capital-intensive
Products. This statement is an illustration of the ____________________________
Of comparative advantage.
A) commodity terms of trade theory
B) supply and demand theory
C) factor-sourcing theory
D) factor endowment theory
E) relative advantage theory

Question

Quizplus · Accepted Answer

The statement refers to the factor endowment theory, which suggests that countries tend to specialize in producing goods that utilize their abundant factors of production, and trade with countries that have a relative scarcity of these factors. In this case, China's abundance of labor leads it to specialize in labor-intensive industries and export these products, while importing capital-intensive goods.

In General, a Labor-Abundant Country (Such as China) Tends to Specialize