In the two-sector (manufacturing and agriculture) specific-factors model, an increase in the price of the manufactured good will cause:
A) an increase in the wage in the manufacturing sector.
B) capital to move from the agricultural to the manufacturing sector.
C) land to move from the manufacturing to the agricultural sector.
D) a decrease in the wage in the agricultural sector.

Question

Quizplus · Accepted Answer

In the specific-factors model, an increase in the price of the manufactured good raises the marginal revenue product of labor in manufacturing, leading to higher wages in that sector.

In the Two-Sector (Manufacturing and Agriculture) Specific-Factors Model, an Increase