Assume a two-country, two-commodity, two-input model where the following relationships hold:(K/L)U.S. > (K/L)ROW (K/L)automobiles > (K/L)shoes(K/L)U.S. 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 indicates the capital-labor ratio in the production of automobiles, and (K/L)shoes indicates 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. Which of the following statements is true?
A. Production of shoes is relatively cheaper in the United States than the Rest of the World.
B. The laborers in the United States are less productive than the laborers in the Rest of the World.
C. Production of automobiles is relatively labor-intensive.
D. Production of shoes is relatively labor-intensive.
Answer: D
Economics
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