Assume a two-country, two-commodity, two-input model where the following relationships hold:

(K/L)Japan> (K/L)India

(K/L)steel> (K/L)computers

(K/L)Japanis the capital-labor ratio in Japan, (K/L)Indiais the capital-labor ratio in India, (K/L)computersindicates the capital-labor ratio in the production of computers, and (K/L)steelindicates the capital-labor ratio in the production of steel.

Assume further that technology and tastes are the same in Japan and India. This information indicates that Japan

a.

is a relatively capital-scarce country.

b.

is a relatively capital-abundant country.

c.

is a relatively land-abundant country.

d.

has a scarcity of land.

Consider production-possibility curves. Which of the following statements is true:

a.

Increasing-cost production-possibility curves provide us with information about consumer preferences.

b.

Constant-cost production-possibility curves are straight lines and usually lead to complete specialization under free trade.

c.

Constant-cost production-possibility curves are convex to the origin.

d.

Under free trade, bowed-out production-possibility curves are associated with complete specialization, because the opportunity cost of producing each good is constant along the curve.

Which of the following can be concluded from the relationships given below?

(U.K. capital stock) > (rest of the world's capital stock)

(U.K. labor supply) < (rest of the world's labor supply)

a.

The United Kingdom is relatively capital-abundant compared to the rest of the world.

b.

The rest of the world will import labor-intensive goods.

c.

The United Kingdom is relatively labor-abundant compared to the rest of the world.

d.

The rest of the world will export both labor-intensive and capital-intensive goods.

Which of the following theories predicts that a country will import those goods that use the country's scarce factor(s) intensively and export those goods that use the country's abundant factor(s) intensively?

a.

The theory of absolute advantage

b.

The Heckscher-Ohlin theory

c.

The theory of purchasing power parity

d.

The theory of comparative advantage