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

question 2

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 long run following the opening of free trade between the countries?

• A)The workers in Alpha will be better off but the land owners will be worse off.
• B)The workers in Beta will be better off while the land owners will be worse off.
• C)The workers and land owners in the food industry in Beta will be better off while the workers and landowners in the drink industry will be worse off.
• D)The workers and land owners in the food industry in Alpha will be better off while the workers and landowners in the drink industry will be worse off.

---

Definitions:

Weekly Cash Flows

The movement of cash in and out of a business on a weekly basis, tracking how money is spent and received.

Opportunity Cost

The expense incurred by not choosing the second-best option while deciding.

Monthly Cash Flows

The total amount of money being transferred into and out of a business, particularly during a month.

Lockbox System

A system used by companies to expedite the collection of check payments by having them processed through a bank's PO Box.