Assume the Standard Trade Model with Two Countries (Alpha and Beta)

question 48

Multiple Choice

Assume the standard trade model with two countries (Alpha and Beta) , two goods (food and drink) , and two factors of production (land and labor) . Further assume that Alpha is relatively labor-abundant and drink is relatively labor-intensive. Which of the following is most likely to happen in the short run following the opening of free trade between the countries?

• A)All the workers in both the countries will gain while all the land owners in both the countries will lose.
• B)All the workers in both countries will lose while all the land owners in both the countries will gain.
• C)The workers and land owners in the food industry in Beta will gain while the workers and the landowners in the drink industry will lose.
• D)The workers and the land owners in the food industry in Alpha will gain while the workers and the landowners in the drink industry will lose.

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