Country a Has a Large Pool of Skilled Workers Earning

question 27

Multiple Choice

Country A has a large pool of skilled workers earning $50 per hour and a small pool of unskilled workers earning $18 per hour. Country B has a small pool of skilled workers earning $60 per hour and a large pool of unskilled workers earning $8 per hour. Trade theory predicts that if A and B engage in international trade with each other,

• A) real wages paid to skilled workers will fall in A
• B) unskilled wages will become more unequal between A and B
• C) real incomes will become more equal within B
• D) the wages of unskilled workers in B will fall
• E) wages to all workers in both countries will rise

---

Definitions:

Cost-Leadership Strategy

A competitive strategy focusing on producing goods or services at the lowest cost to outprice competitors.

Differentiation Strategy

A generic business strategy that requires products to have significant points of difference to charge a higher price while targeting a broad array of market segments.

Significant Points

Major or important aspects, factors, or considerations in a given context, such as key arguments in a discussion or essential features of a project.

Market Segments

Subsections of a market composed of individuals or organizations sharing one or more characteristics that cause them to have similar product needs.