Answer:
a. Country A
b. Country B
c. Country A
Explanation:
Given
For Country A
Labor force = 45 million = 45000000
Capital Stock = 15 thousand= 15000
For Country B
Labor Force = 20 million = 20000000
Capital Stock = 10 thousand = 10000
a. Which country is relatively capital abundant
A country is capital abundant if its endowment of capital relative to other factors is large compared to other countries.
We calculate the capital/labor ratio for each country.
For A, Ratio = 45000000÷15000 = 3000
For B, Ratio = 20000000÷10000= 2000
The Ratio of country A is greater than B.
So, A is capital redundant.
b. Which country is relatively labor abundant
A country is labour abundant if its endowment of labour relative to other factors is large compared to other countries.
We calculate the labor/capital ratio for each country
For A, Ratio = 15000÷45000000 = 0.000333
For B, Ratio = 10000÷20000000 = 0.0005
The Ratio of country B js greater than A
So, B is capital redundant.
c. Suppose that good S is capital intensive relative to good T. Which country will have comparative advantage in the production of S?
Heckscher–Ohlin theorem in the two-factor case, it states: "A capital-abundant country will export the capital-intensive good, while the labor-abundant country will export the labor-intensive good"
So, if product S is capital intensive relative to T then country A will have more advantage in production of product T to aid their exportation.
