Scenario 1-1

Assume that Leinster is a labor-abundant country and Saxony is a land-abundant country. In addition, telephones are labor-intensive goods and bread is a land-intensive good. Free trade prevails between the two countries.

Refer to Scenario 1-1. What happens to wages earned by bread and telephone workers in Saxony in the short run?

Group of answer choices

1 Both bread and telephone workers in Saxony see their wages rise in the short run.

2 Bread workers in Saxony see their wages fall while telephone workers will see their wages rise in the short run.

3 Bread workers in Saxony see their wages rise while telephone workers will see their wages fall in the short run.

4 Both bread and telephone workers in Saxony see their wages fall in the short run.