Let’s try an application of the Heckscher-Ohlin model to our countries of Leinster and Saxony, which produce and consume bread and telephones. You may assume that the only two factors of production are labor and land.

a. If Leinster has 8 million acres of land and 2 million laborers, while Saxony has 2 million acres of land and 400,000 laborers, which country is “labor abundant”? Which country is “land abundant”? Explain.

b. If labor accounts for 80 percent of the total cost of producing telephones but only 20 percent of the total cost of producing bread, which country is more likely to export telephones? Which country is more likely to export bread? Why?