Consider two products: automobiles and shoes. If shoes are labor intensive and automobiles are capital intensive, what will happen under the Heckscher-Ohlin model?
A) The labor-abundant country will export automobiles.
B) The capital-abundant country will export shoes.
C) The labor-abundant country will import shoes.
D) The capital-abundant country will import shoes.

Question

Quizplus · Accepted Answer

Under the Heckscher-Ohlin model, a country will export goods that use its abundant factor intensively. Therefore, the capital-abundant country will export automobiles (capital-intensive) and import shoes (labor-intensive).

Consider Two Products: Automobiles and Shoes