In the specific factors model,a 5% increase in the price of food accompanied by a 5% increase in the price of cloth will cause ________ in the welfare of labor,________ in the welfare of the fixed factor in the production of food,and ________ in the welfare of the fixed factor in the production of cloth.
A) no change; no change; no change
B) an increase; an increase; an increase
C) a decrease; an increase; an increase
D) an increase; a decrease; a decrease
E) a decrease; a decrease; a decrease

Question

Quizplus · Accepted Answer

In the specific factors model, if both prices increase by the same percentage, the real wage of labor remains unchanged, and the welfare of the fixed factors in both sectors also remains unchanged.

In the Specific Factors Model,a 5% Increase in the Price