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 all workers in Saxony in the long run?

Group of answer choices

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

2 All workers see their wages fall as labor moves in of the labor-intensive telephone industry but is not needed in the same amounts in the land-intensive bread industry.

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

4 All workers see their wages fall as labor moves out of the labor-intensive telephone industry but is not needed in the same amounts in the land-intensive bread industry