Consider a Specific-Factors model where two countries, Domestic and Foreign, produce two goods, A and B, using labor L and capital K. Take the following information as given:  In Domestic, the marginal product of labor in the A industry is (1/LA) 1/4  In Domestic, the marginal product of labor in the B industry is (1/LB) 1/4 2.1. What is LA/LB in equilibrium if the price of A is 2 and the price of B is 5?

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In the SpecificFactors model each industry uses a specific factor of production intensively while th... View the full answer