What does the HO model predict will happen to the real returns to factors of production after trade occurs?
a. Labor and capital must be used together in production, and there is no room for competition for remuneration.
b. Capital owners always get the "gains from trade."
c. Resources used intensively in export industries (such as labor in China and capital in the United States) will see an increase in their returns, whereas the resources used intensively in importcompeting industries will see a decline in their return.
d. Poor nations will always get the least returns to their factors of production.
Ans: c. Resources used intensively in export industries (such as labor in China and capital in the United States) will see an increase in their returns, whereas the resources used intensively in importcompeting industries will see a decline in their return.
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