Question
Suppose in the Heckscher-Ohlin framework that in countries A and B it takes aLX= 14 units of labor to make 1 unit of X while
Suppose in the Heckscher-Ohlin framework that in countries A and B it takes aLX= 14 units of labor to make 1 unit of X while it takes aKX= 5 units of capital to make 1 unit of good X.Suppose also that it takes aLY= 18 units of labor to make 1 unit of Y while it takes aKY= 6 units of capital to make 1 unit of good Y.
Suppose that in country A has KA= 150 units of capital and LA= 100 units of labor.Suppose also that country B has KB= 200 units of capital and LB= 120 units of labor.Using this information, we can say that
A. country A has a comparative advantage in X.
B. country B has a comparative advantage in Y.
C. none of the other options.
D. country A will tend to move toward specialization in good Y and import good X if we move from autarky to free trade.
E. country A will see the relative price of X increase if we move from autarky to free trade.
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