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SCORPION-xisa [38]
3 years ago
14

China's massive and rapid industrialization since the 1990s has resulted in

Social Studies
2 answers:
Ymorist [56]3 years ago
5 0
I suppose the answer is B
Leviafan [203]3 years ago
3 0
The answer would be d 
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Assume labor and capital are the only two inputs. Digitopolis is a capital-abundant country that produces personal computers and
chubhunter [2.5K]

Answer:

Following the Ricardian Model of Comparative Advantage, <u>both Digitopolis and the labor-abundant country will specialize at producing  what each does best, according to its factors endowment.</u>

This means that <u>Digitopolis will shift its production to computers</u> as it is a capital intensive activity and <u>its opportunity cost </u>for computers production is lower,<u> while the second country, being labor-abundant, will specialize on producing fax machines.</u>

Explanation:

The Ricardian Model of Comparative Advantage assumes that countries benefit from international trade as they will specialize in producing goods where they hold comparative advantage, that is, where their opportunity cost is lower. The opportunity cost describes the trade-off between choosing to produce one good or the other based on inputs availability and efficiency. In this case, capital is abundant in Digitopolis, so it is evident that the opportunity cost of shifting output to a capital-intensive industry (computers) will be less than producing labor-intensive goods (fax machines).

Being a capital-abundant country, for Digitopolis the opportunity cost of producing fax machines is higher than for producing computers, so it is less efficient for this country to focus on producing fax machines. <u>Thus, it will be more productive that it specializes on producing computers. </u>

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