Assume a two-country, two-commodity, and two-input model. Let the two countries in this model be the United States and the Rest of the World and the two goods being produced by each of the countries be steel and wheat. The two factors of production used in producing the goods in each country are capital and land. If the United States is capital-abundant and steel production is capital-intensive, the Heckscher-Ohlin model would predict that the United States would

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Social Studies

Jairo Chen

29 July, 06:57

Assume a two-country, two-commodity, and two-input model. Let the two countries in this model be the United States and the Rest of the World and the two goods being produced by each of the countries be steel and wheat. The two factors of production used in producing the goods in each country are capital and land. If the United States is capital-abundant and steel production is capital-intensive, the Heckscher-Ohlin model would predict that the United States would

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Brady Hudson · Answer 1

export steel and import wheat.

Explanation:

The Heckscher-Ohlin model would predict that the United States would export steel and import wheat. Heckscher-Ohlin model suggest that a country will export what he can plentifully produce and import products which it can produce. Considering that steel is capital intensive and United States is capital abundant, US will produce more steel and export it. On the other hand, with is labor intensive and the US is not labor abundant can therefore not produce substantial amount of wheat, the US will import wheat and export steel.