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Consider the specific-factors model with 2 goods: manufacturing and agriculture. Manufacturing requires labour and sector-specific capital, while agriculture requires labour and sector-specific land. Labour is
Consider the specific-factors model with 2 goods: manufacturing and agriculture. Manufacturing requires labour and sector-specific capital, while agriculture requires labour and sector-specific land. Labour is freely mobile across sectors. The government is considering to impose an import tariff on agricultural products. Which of the following is true?
- (a)The relative price of agricultural products will go down.
- (b)Capitalists will support this initiative.
- (c)Agricultural production will increase.
- (d)Marginal product of labour will decrease in manufacturing.
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