In the long run, when factors are mobile, an increase in
The relative price of a good will increase the real earnings
Of the factor used intensively in the production of that
Good.This is known as:
A)the HeckscherOhlin model.
B)the StolperSamuelson theorem.
C)the Riparian model.
D)the specificfactor theorem.

Question

In the long run, when factors are mobile, an increase in
The relative price of a good will increase the real earnings
Of the factor used intensively in the production of that
Good.This is known as:
A)the Heckscher­Ohlin model.
B)the Stolper­Samuelson theorem.
C)the Riparian model.
D)the specific­factor theorem.

Quizplus · Accepted Answer

The statement described in the question refers to the Stolper-Samuelson theorem. This theorem explains that when the price of a good increases (due to factors such as tariffs or changes in demand), the real earnings of the factor used intensively in the production of that good will increase, while the real earnings of the other factor will decrease. This is because the intensively used factor becomes relatively more scarce and thus its price increases, while the other factor becomes relatively more abundant and its price decreases. The other options (Heckscher-Ohlin model, Riparian model, specific-factor theorem) do not directly relate to the scenario described in the question.

In the Long Run, When Factors Are Mobile, an Increase