In the "specific-factors" model where capital in each sector is fixed but labor can move Freely between the two sectors, the opening of the country to trade will increase the real Return to capital in the __________ sector and will increase the real wage of a worker Who __________.
A) export; consumes mostly the import good
B) export; consumes mostly the export good
C) import-competing; consumes mostly the import good
D) import-competing; consumes mostly the export good

Question

Quizplus · Accepted Answer

In the specific-factors model, opening to trade benefits the export sector, increasing the return to capital there. Workers who consume mostly the import good benefit from lower prices due to imports, thus their real wage increases.

In the "Specific-Factors" Model Where Capital in Each Sector Is