In the Specific Factors Model, a 5% Increase in the Price

question 19

Multiple Choice

In the specific factors model, a 5% increase in the price of food accompanied by a 10% increase in the price of cloth will cause ________ in the welfare of labor, ________ in the welfare of the fixed factor in the production of food, and ________ in the welfare of the fixed factor in the production of cloth.

• A) an ambiguous change; an increase; a decrease
• B) a decrease; an ambiguous change; an ambiguous change
• C) an ambiguous change; an ambiguous change; an ambiguous change
• D) an ambiguous change; a decrease; an increase
• E) an increase; a decrease; an increase

---

Definitions:

Updating Beliefs

The process of adjusting one's expectations or predictions based on new evidence or information.

Conservatism

In accounting, it is the principle of recognizing expenses and liabilities as soon as possible when there is uncertainty about the outcome, but only recognizing revenues when they are assured of being received.

Put-call Ratio

A metric used to measure market sentiment by dividing the number of traded put options by the number of traded call options.

Breadth

The extent to which movements in the broad market index are reflected widely in movements of individual stock prices.