Initially, workers in the shoe industry and the computer industry earn the same wage. Reductions in trade barriers give domestic consumers access to cheaper shoes produced abroad, so domestic shoe prices fall. At the same time, foreign consumers purchase more computers, raising the relative price of computers. As a result of these changes, wages in the shoe industry ________ and wages in the computer industry ________.
A)increase; increase
B)increase; decrease
C)decrease; increase
D)decrease; decrease

Question

Quizplus · Accepted Answer

In this case, fewer workers are demanded in the declining shoe industry, while more workers are demanded in the growing computer industry. Wages will adjust to the new demands; decreasing in the shoe industry and increasing in the computer industry.

Initially, Workers in the Shoe Industry and the Computer Industry