Assume that only two countries, A and B, exist. Consider the following endowments: LA 45 KA...

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Assume that only two countries, A and B, exist. Consider the following endowments: LA 45 KA 15 Le-20 Ke 10 and assume that go

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Answer 1

Answer #1

Answer: Country B will export Good S

Here

La = 15

Ka = 15/45 = 1/3

Lb = 10

Kb = 10/20 = 1/2

Ka/ La = (1/3)/15 = 1/45 = 0.022

Kb / Lb = (1/2)/10 = 1/20 = 0..05

Kb / Lb = 0.05 is greater than Ka/La = 0.022

Which means Country be is capital abundant

Hence Country B will export Good.

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Answer 2

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