In the short-run, following the opening of trade:
A)inputs move across sectors, but input returns remain constant.
B)factor payments in the import-competing sectors will decline.
C)the supply of resources to the export-oriented sectors will decline.
D)workers in all the sectors will receive lower wages due to cheap imports.

Question

Quizplus · Accepted Answer

When trade opens, the import-competing sectors face competition from cheaper or better-quality imports, leading to a decline in demand for their products. This reduced demand decreases the need for inputs (like labor) in these sectors, which in turn lowers the factor payments, such as wages, to workers in the import-competing sectors.

In the Short-Run, Following the Opening of Trade