Chile and the United States use capital and labor to produce wheat and automobil

Question

Chile and the United States use capital and labor to produce wheat and automobiles. The United States is capital abundant, and Chile is labor abundant. Wheat production is more labor intensive than automobile production. According to the Stolper–Samuelson theorem:

A)Chilean workers should support United States–Chile free trade.

B)Chilean owners of capital should support United States–Chile free trade.

C)U.S. owners of capital should oppose United States–Chile free trade.

D)both U.S. and Chilean owners of capital should oppose United States–Chile free trade.

Explanation / Answer

According to the Stolper–Samuelson theorem:

Wages in the United States will fall as a result of U.S.-Chile free trade.

So,Chilean workers should support United States–Chile free trade.

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