Suppose that labor is mobile between sectors but that capital and land are specific. Then labor is more likely to benefit from trade when:
A) it spends a large amount of its income on the imported good.
B) it spends a large amount of its income on the exported good.
C) wages do not change much in percentage terms.
D) wages increase only in industries competing with imports.

Question

Quizplus · Accepted Answer

When labor spends a large amount of its income on the imported good, trade can lower the price of that good, effectively increasing the real income of labor, thus benefiting them.

Suppose That Labor Is Mobile Between Sectors but That Capital