Two countries, Spain and Portugal, use two inputs, capital and
labor, to produce two goods, wine and cheese. Wine is relatively
capital intensive in production and Spain is the relatively capital
abundant country.
5) According to the Rybczynski Theorem, if Portugal were a small
country with a free trade policy, growth of the labor force would
cause:
Question 5 options:
wages to fall, and the reward to capital to increase in
Portugal.
expansion of the cheese industry and contraction of...