Suppose Country Y Produces Only Corn and Clothing Using Only

question 50

Multiple Choice

Suppose country Y produces only corn and clothing using only two inputs- land and labor. Production of corn requires an intensive use of land whereas, clothing is a labor-intensive good. If the price of corn increases by 15 percent, the price of clothing remaining constant, the Stolper-Samuelson theorem predicts that in the long run:

• A)the rental rate of land will increase by 15 percent.
• B)the rental rate of land will increase by more than 15 percent.
• C)the wage rate will increase by more than 15 percent.
• D)the wage rate will remain unchanged.