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Unformatted text preview: l shift resources into the production of agricultural goods and away from
China will shift resources out of the production of agricultural goods and into the
production of labor-intensive goods.
China will export capital-intensive goods like automobiles and import laborintensive goods like clothing. 3 FBE 462
Sample Midterm #1 Use the information below to answer the two question that follows immediately:
Assume a two-country, two-good, two-factor of production world where the following
(K/L)automobiles > (K/L)ROW
(K/L)shoes where (K/L)US is the capital-labor ratio in the United States, (K/L)ROW is the capital-labor ratio
in the Rest of the World, (K/L)automobiles is the capital-labor ratio in the production of
automobiles, and (K/L)shoes is the capital-labor ratio in the production of shoes. Assume further
that technology and tastes are the same in the United States and the Rest of the World. 9.
The relationships shown above indicate that the United States is:
A capital-intensive country.
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This note was uploaded on 02/15/2011 for the course FBE 462 at USC.