In the graph in Question #24 above, if the two countries are opened to trade with each other, country A will export __________ and country B __________.
A) good X; will export good Y
B) good X; also will export good X because there has been a factor-intensity reversal
C) good Y; also will export good Y because there has been a factor-intensity reversal
D) good Y; will export good X

Question

Quizplus · Accepted Answer

According to the Rybczynski Theorem, when two countries trade with each other, each country will increase production of the good that uses its abundant factor intensively and decrease production of the good that uses its scarce factor intensively. In this scenario, country A is abundant in labor and country B is abundant in capital. Good Y is labor-intensive, while Good X is capital-intensive. Therefore, country A will increase production of Good Y and country B will increase production of Good X. Thus, country A will export Good Y and country B will export Good X. Choice D is the only one that reflects this result.

In the Graph in Question #24 Above, If the Two