Question
Consider the specific factors model.Suppose that a country produces automobiles (A) and boots (B) .Suppose also that we have A-specific capital and B-specific capital.Also, assume
Consider the specific factors model.Suppose that a country produces automobiles (A) and boots (B) .Suppose also that we have A-specific capital and B-specific capital.Also, assume that labor is mobile within a country.If a country with a comparative advantage in good A moves from autarky to free trade and the price of good B stays the same from its point of view, then we would expect
A. the wage to increase by a greater percentage than the increase in the price of good A.
B. the wage to decrease.
C. the wage to increase by a lower percentage than the increase in the price of good A.
D. all workers in industry A to be better off.
E. B capital owners to be better off.
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