Consider two products, automobiles and shoes. If shoes are labor intensive and automobiles are capital intensive, what can we expect in freetrade conditions?
a. The relative price of automobiles in the autoexporting country will decrease.
b. The relative price of shoes in the shoeexporting country will increase.
c. The capitalabundant country will produce more shoes.
d. The laborabundant country will produce more automobiles.
Ans: b. The relative price of shoes in the shoeexporting country will increase.
Economics
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