The factor-endowment theory predicts that because the United States is relatively abundant in capital and relatively scarce in labor, it will export capital-intensive goods, and its import-competing goods will be labor intensive. In the 1950s, Wassily Leontief, a Russian-American economist, tested this proposition by analyzing the capital/labor ratios of export industries and import-competing industries, using U.S. data. He found that the capital/labor ratio for U.S. export industries was lower than that of the United Statesâ import-competing industries, which means that U.S. exports were less capital intensive than import-competing goods. These findings appeared to contradict the predictions of the factor-endowment theory and became known as the Leontief paradox.

Replicate Leontief's test using the date shown in the following table. Compute the ratio for exports and imports, and enter each value in the last column of the table.

Used to produce $1 Million Worth of⦠Capital (Dollars) Labor(Person-years) Capital/ Labor Ratio (Dollars per person- year)
Exports 1,800,000 80
Imports 3,000,000 100

The numbers in the previous table show that US. exports are __________ and U.S. imports are_________

What do the results of your test illustrate? Check all that apply.

a. The Leontief paradox
b. The Heckschner-Ohlin theory