The following input-requirements data are for country A, a capital-abundant country where they produce nothing but bread and wine using only capital and labor as inputs. $$\begin{array} { | c | c | c | }
\hline & 1 \text { pound of bread } & \text { 1 gallon of wine } \
\hline \text { Capital input } & 5 \text { units } & 20 \text { units } \
\hline \text { Labor input } & 4 \text { units } & 10 \text { units } \
\hline
\end{array}$$ Following the opening of trade, Country A would probably:
A)export both bread and wine.
B)export wine and import bread.
C)import both the goods.
D)export bread and import wine.

Question

The following input-requirements data are for country A, a capital-abundant country where they produce nothing but bread and wine using only capital and labor as inputs. $$\begin{array} { | c | c | c | } 
\hline & 1 \text { pound of bread } & \text { 1 gallon of wine } \
\hline \text { Capital input } & 5 \text { units } & 20 \text { units } \
\hline \text { Labor input } & 4 \text { units } & 10 \text { units } \
\hline
\end{array}$$ Following the opening of trade, Country A would probably:
A)export both bread and wine.
B)export wine and import bread.
C)import both the goods.
D)export bread and import wine.

Quizplus · Accepted Answer

Country A is capital-abundant, meaning it has a relatively large amount of capital compared to labor. In the production of both bread and wine, capital is used more intensively than labor. Therefore, Country A has a comparative advantage in producing goods that use capital intensively, such as wine. After trade opens, Country A will likely export wine and import bread, which is less capital-intensive and uses more labor.

The Following Input-Requirements Data Are for Country A, a Capital-Abundant