Question

The theory of resource endowment:

A. explains why France exports cosmetics, wine, commercial aircraft, and clothing.

B. states that a nation will trade goods that can be produced with the production factor that is most abundant.

C. explains why an automobile can be made either by hand or by a capital-intensive process.

D. explains why transportation costs may be ignored when calculating the costs of imports.

E. none of the above.

Answer 1

The correct answer is B: the theory of resource endowment states that a nation will trade goods that can be produced with the production factor that is most abundant. This is part of the Heckscher-Ohlin model of international trade, which is based on countries trading goods efficiently produced with their abundant resources.

Step-by-step explanation:

The theory of resource endowment, also known as factor endowments, suggests that a nation will trade goods that can be produced most efficiently with the resources or factors of production that are most abundant. Therefore, the correct answer to the student's question is B: states that a nation will trade goods that can be produced with the production factor that is most abundant. This theory is part of the Heckscher-Ohlin model, which explains the variance in comparative advantage that nations hold in international trade, based on their differing factor endowments.

Scarcity impacts how different countries allocate their resources and specialize in the production of certain goods. For instance, a country like Saudi Arabia, with vast oil reserves, would specialize in petroleum extraction, while a region like central US with fertile land might focus on agriculture. These natural resource endowments lead countries to produce and export goods in areas where they have a comparative advantage.