In the specific factors model,a 5% decrease in the price of food accompanied by a 5% decrease in the price of cloth will cause in the welfare of labor,in the welfare of the fixed factor in the production of food,and in the welfare of the fixed factor in the production of cloth.
A)an increase; an increase; an increase
B)a decrease; an increase; an increase
C)a decrease; a decrease; a decrease
D)an increase; a decrease; a decrease
E)no change; no change; no change

Question

Quizplus · Accepted Answer

In the specific factors model, if both prices decrease by the same percentage, the relative prices remain unchanged, leading to no change in the welfare of labor and the fixed factors.

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