Suppose That the Home Country in the Two-Sector (Manufacturing and Agriculture)

question 16

Multiple Choice

Suppose that the home country in the two-sector (manufacturing and agriculture) specific-factors model has a comparative advantage in manufactured output. Which statement below best describes changes in returns on capital and land after trade occurs?

• A) The return on capital and land will both rise.
• B) The return on capital and land will both fall.
• C) The return on capital will rise and the return on land will fall.
• D) The return on capital will fall and the return on land will rise.

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