Assume a two-country, two-commodity, two-input model where the following relationships hold:(K/L)U.S. > (K/L)ROW(K/L)automobiles > (K/L)shoes (K/L)U.S. is the capital-labor ratio in the United States, (K/L)ROW is the capital-labor ratio in the Rest of the World, (K/L)automobiles indicates the capital-labor ratio in the production of automobiles, and (K/L)shoes indicates the capital-labor ratio in the production of shoes.Assume further that technology and tastes are the same in the United States and the Rest of the World. According to the Heckscher-Ohlin model, free trade between the United States and the Rest of the World would result in
A. an improvement in economic well-being in both the United States and the Rest of the World.
B. no change in economic well-being in the United States but an improvement in economic well-being in the Rest of the World.
C. deterioration of economic well-being in the United States but an improvement in economic well-being in the Rest of the World.
D. an improvement in economic well-being in the United States but deterioration of economic well-being in the Rest of the World.
Answer: A
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