If One Country's Wage Level Is Very High Relative to the Other's

question 22

Multiple Choice

If one country's wage level is very high relative to the other's (the relative wage exceeding the relative productivity ratios) then it is probable that

• A) free trade will not improve either both countries welfare.
• B) free trade will result in no trade taking place.
• C) free trade will result in each country exporting the good in which it enjoys comparative advantage.
• D) free trade will result in each country exporting the good in which it suffers the greatest comparative disadvantage.
• E) free trade will not affect the economic welfare of either country.

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