In the specific factors model,a 5% increase in the price of food accompanied by a 5% increase in the price of cloth will cause wages to _,the production of cloth to _,and the production of food to .
A)increase by less then 5%; decrease; increase
B)remain constant; increase; increase
C)increase by 5%; remain unchanged; remain unchanged
D)increase by more then 5%; increase; remain unchanged
E)remain constant; decrease; decrease

Question

Quizplus · Accepted Answer

In the specific factors model, if both goods' prices increase by the same percentage, wages will increase by that percentage, and production levels will remain unchanged as relative prices and resource allocation do not change.

In the Specific Factors Model,a 5% Increase in the Price