Can someone please explain the process of how you get the an
Can someone please explain the process of how you get the answer not just give me the answer. Thank you very much!
There are two countries, Home and Foreign. Both countries produce food (F) and cloth (C) using labour (L) and capital (K). Labour and capital are currently allocated in the following way between the sectors.
Home: LF = 250 KF = 300 LC = 100 KC = 50
Foreign: LF* = 200 KF* = 190 LC* = 100 KC* = 90
Which of the following is TRUE?
Select one:
a. Food is labour-intensive in Home and capital-intensive in Foreign.
b. Food is capital-intensive in Home and labour-intensive in Foreign.
c. Food is capital-intensive in both countries.
d. Cloth is capital-intensive in both countries.
Solution
Option B.
The number of units of labor required for making food is less than number of units of capital required in home, thus , food is capital intensive in Home and also number of units of labor required to manufacture food is more than number of units of capital required to manufacture food in foreign and thus food is capital intensive in home and labor intensive in foreign.
