Suppose that the Home country in the twosector
(manufacturing and agriculture) specificfactors model
Has a comparative advantage in manufactured output.
What is the effect on the return of land after trade
Occurs?
A)The return on land increases.
B)The return on land decreases.
C)The return on land does not change.
D)The effect cannot be determined.

Question

Suppose that the Home country in the two­sector
(manufacturing and agriculture) specific­factors model
Has a comparative advantage in manufactured output.
What is the effect on the return of land after trade
Occurs?
A)The return on land increases.
B)The return on land decreases.
C)The return on land does not change.
D)The effect cannot be determined.

Quizplus · Accepted Answer

With the home country having a comparative advantage in manufactured goods, there will be an increase in manufactured output and a decrease in agricultural output. This decrease in agricultural production will lead to a decrease in the demand for land, causing the return on land to decrease.

Suppose That the Home Country in the Two­sector

Suppose That the Home Country in the Twosector