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.

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Definitions:

Price Discrimination

The practice of charging different prices to different customers for the same product or service, typically without a difference in cost.

Price Discrimination

The practice of selling the same product to different buyers at different prices, often based on market power.

Dominant Firm

A company that has a large share of the market and can influence market conditions and prices.

Clayton Act

a United States antitrust law enacted in 1914, aiming to promote competition and prevent monopolies by addressing specific practices not sufficiently covered by the Sherman Act.