According to factor proportion trade theory,a country that is relatively labor abundant should specialize in the production of relatively labor-intensive goods.It should then export those labor-intensive goods in exchange for capital-intensive goods.

Question

Quizplus · Accepted Answer

This statement is consistent with the factor proportion trade theory, which suggests that countries should specialize in the production of goods based on their relative abundance of factors of production. In this case, a labor-abundant country would have a comparative advantage in the production of labor-intensive goods and should trade for capital-intensive goods that it is not specialized in producing.

According to Factor Proportion Trade Theory,a Country That Is Relatively