When a country's labor market is in equilibrium in the specific factors model,the wage rate
A) will be the same in both sectors.
B) will be higher in the export-competing sector.
C) will be higher in the import-competing sector.
D) will be higher in the sector where product price is higher.
E) will be higher in the sector where product price is lower.

Question

Quizplus · Accepted Answer

In the specific factors model, in equilibrium, the wage rate will be the same in both sectors. This is because labour is assumed to be the only specific factor of production, and it is free to move between sectors until the wage rate is equalized. Therefore, the wage rate is determined by the overall supply and demand for labour in the economy.

When a Country's Labor Market Is in Equilibrium in the Specific