(Table: Factor Use in Latvian Trade) According to the Heckscher-Ohlin model, Latvia's capital-labor ratios are consistent with:
A) Latvia being a capital-abundant country.
B) Latvia being a labor-abundant country.
C) Latvia being neither a capital- nor labor-abundant country.
D) Latvia being both a labor- and capital-abundant country.

Question

(Table: Factor Use in Latvian Trade)  According to the Heckscher-Ohlin model, Latvia's capital-labor ratios are consistent with:
A) Latvia being a capital-abundant country. 
B) Latvia being a labor-abundant country. 
C) Latvia being neither a capital- nor labor-abundant country. 
D) Latvia being both a labor- and capital-abundant country.

Quizplus · Accepted Answer

According to the Heckscher-Ohlin model, a country is considered to be labor-abundant when its capital-labor ratio is less than the world average, and capital-abundant when its capital-labor ratio is greater than the world average. Looking at the table, we can see that Latvia has a relatively low capital-labor ratio compared to its trading partners, indicating that it is a labor-abundant country.