With Free Trade, If Country X Is Relatively Labor Abundant

question 45

Multiple Choice

With free trade, if country X is relatively labor abundant and relatively land scarce and country Y is relatively labor scarce and relatively land abundant, the factor-price equalization theorem predicts that:

• A)rents will rise in country X and fall in country Y until they equalize.
• B)wages will rise in country X and fall in country Y until they equalize.
• C)rents will fall in country Y but will remain unchanged in country X.
• D)wages will increase in country Y but will remain unchanged in country X.

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Definitions:

Individual Loafing

A tendency for people to exert less effort when working in a group compared to when working alone, known as social loafing.

Teams

Groups of individuals working together towards a common goal or objective.

Social Facilitation

The tendency for one’s behavior to be influenced by the presence of others in a group.

Enthusiastic Audience

A group of people who show a high level of excitement or eagerness towards a particular event, presentation, or performer.