Based on Leontief Theory, which of the following paradoxes is correct?
A) demand bias for capital-intensive goods and existence of trade barriers
B) importance of natural resources
C) prevalence of factor-intensity reversals
D) all of the above

Question

Quizplus · Accepted Answer

Leontief Theory suggests that countries with abundant capital will export capital-intensive goods and import labor-intensive goods. However, if there are trade barriers, it may lead to a paradox of demand bias for capital-intensive goods. The theory also doesn't consider the role of natural resources, leading to the paradox of the important role of natural resources in trade. Additionally, there exist factor-intensity reversals where a country that is capital-abundant in a particular industry becomes labor-abundant in that industry when it becomes an exporter. Therefore, all the above paradoxes are correct based on Leontief Theory.

Based on Leontief Theory, Which of the Following Paradoxes Is