1. .In the specific-factors model, an increase in the amount of labor used in manufacturing will ____________the marginal product of ____________used in the production of agriculture.

Select one:

a.Increase; land

b.Decrease; capital

c.Increase; labor

d.Decrease; labor

2.Suppose that the home country in the two-sector (manufacturing and agriculture) specific-factors model has a comparative advantage in manufactured output. What is the change to the real return on capital after trade occurs?

Select one:

a.The real return on capital increases.

b.The real return on capital decreases.

c.The real return on capital does not change.

d.The effect cannot be determined.

3.If the wage rate in the agriculture sector is lower than the manufacturing sector, then labor will migrate to the manufacturing sector. This will cause:

Select one:

a.both the wage and the marginal product of labor in the manufacturing sector to decrease.

b.both the wage and the marginal product of labor in the agriculture sector to decrease.

c.the nation to import more goods.

d.There will be no effect on either sector.

4.A(n) ____________in the price of agriculture leads to a less than proportional ____________in the nominal wage paid to workers.

Select one:

a.decrease; increase

b.increase; decrease

c.decrease; decrease

5.Suppose that land is specific to agriculture, capital is specific to manufacturing, and labour is mobile between sectors. A(n) ____________in the nominal and real income of capital could be caused by a(n) ____________in the price of agricultural products.

Select one:

a.increase; increase

b.decrease; decrease

c.increase; decrease

6.Brazil and Chile produce coffee and wine using land and labor. Labor is mobile between the sectors, however, coffee beans and wine require different soil and climate. This means that some land is good only for growing coffee beans and some land is only good for growing wine grapes. Brazil is relatively abundant in (has more) coffee-growing land, while Chile is relatively abundant (has more) in wine grape growing land. Preferences are identical in both countries. Assume both countries are in autarky. In an effort to work harder and have fewer hangovers, consumers in both countries increase their demand for coffee and reduce their demand for wine. Which of the following statements is true.

Select one:

a.The price of coffee should rise relative to the price of wine.

b.The output of wine should rise in both countries.

c.The output of coffee in Brazil should decrease.