In contrast to the Ricardian model, international trade in the two-sector (manufacturing and agriculture) specific-factors model:
A) will lead to gains for all resources.
B) will lead to losses for all resources.
C) will lead to gains for some resources and losses for other resources.
D) will not lead to any in the returns of any resources.

Question

Quizplus · Accepted Answer

The specific-factors model predicts that trade will lead to gains for the specific factor that is used intensively in the country's export industry, and losses for the specific factor that is used intensively in the import-competing industry. For example, if a country exports manufactured goods, then owners of capital in that country will see gains, while owners of land used in agriculture will experience losses. Conversely, if a country imports manufactured goods, then owners of land in that country will see gains, while owners of capital used in manufacturing will experience losses. Therefore, trade will lead to gains for some resources and losses for other resources in the specific-factors model.

In Contrast to the Ricardian Model, International Trade in the Two-Sector