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1. Consider a 2-country world with many goods and labour as the only factor of production, where the US have an absolute technological advantage relative
1. Consider a 2-country world with many goods and labour as the only factor of production, where the US have an absolute technological advantage relative to India in the production of all goods, except for one, for which productivity is the same in both countries. Assume that India experiences technological catch-up. Then: (a) Indian relative wage falls, the US enjoy a welfare gain and India a welfare loss (b) India relative wage increases but remains lower than one (1), and welfare increases in both countries (c) Indian relative wage equals one (1), welfare increases in India and falls in the US (d) Indian relative wage increases above one (1), welfare increases in India and falls in the US [10 marks]
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