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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Definitions:

Guarantor

An individual or entity that agrees to be responsible for another's debt or obligations in case of default.

Obligee

In contract law, the party to whom another party owes an obligation.

Specially Manufactured Goods

Products that are custom-made to a buyer's specifications, often not suitable for sale to others.

Oral

relates to spoken rather than written communication, often used in contexts such as contracts, agreements, or testimonies.