Suppose there are only two countries, Nookshire and the Anniston. There are only

Question

Suppose there are only two countries, Nookshire and the Anniston. There are only two products, ale and swords. Both countries produce these products. Production of both products requires the factors capital and labor as inputs. In both countries, it takes two units of labor and one unit of capital to produce a keg of ale. In both countries, it takes one unit of labor and five units of capital to produce a sword. The Nookshire has twenty units of capital and forty units of labor. Anniston has forty units of capital and fifty units of labor. According to the Heckscher-Ohlin theory, which product does the Nookshire export, and which product does Anniston export. Why?

Explanation / Answer

Suppose there are only two countries, Nookshire and the Anniston. There are only

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