Initially, Workers in the Shoe Industry and the Computer Industry

question 37

Multiple Choice

Initially, workers in the shoe industry and the computer industry earn the same wage. Reductions in trade barriers give domestic consumers access to cheaper shoes produced abroad, which causes domestic shoe prices fall. At the same time, foreign consumers purchase more computers, raising the relative price of computers. As a result of these changes, the demand for labor in the shoe industry ________ and the demand for labor in the computer industry ________.

• A)increases; increases
• B)increases; decreases
• C)decreases; increases
• D)decreases; decreases

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