What Does the Stolper-Samuelson Theorem Predict Will Happen to the Real

question 31

Multiple Choice

What does the Stolper-Samuelson theorem predict will happen to the real returns to factors of production after trade occurs?

• A) Labor and capital must be used together in production, and there is no room for competition for remuneration.
• B) Capital owners always get the "gains from trade."
• C) Resources used intensively in export industries (such as labor in China and capital in the United States) will see an increase in their returns, whereas the resources used intensively in import-competing industries will see a decline in their return.
• D) Poor nations will always get the least returns to their factors of production.

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Definitions:

Marginal Cost

The increase or decrease in the total cost that arises when the quantity produced is incremented by one unit.

Labor Force

The total number of people who are currently employed or actively seeking employment within an economy.

Opportunity Cost

Represents the value of the best alternative that is foregone when a decision is made to pursue a certain action.

Household Income

The combined gross income of all members of a household, which can include wages, salaries, pensions, government benefits, and any other income.