In the specific factors model,a 5% decrease in the price of food accompanied by a 5% decrease 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, a decrease in the price of a good reduces the welfare of the fixed factor in its production and increases the welfare of the fixed factor in the production of other goods.

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