In the specificfactors model, suppose that a country has a comparative advantage in manufacturing output. Will workers be better or worse off following the opening of trade with other countries?
a. Workers will be better off because the nominal wage increases.
b. Workers will be better off because both nominal and real wages increase.
c. Workers may be better off or worse off because the real wage in terms of the agricultural good rises and the real wage in terms of the manufactured good falls.
d. Workers may be better off or worse off because the real wage in terms of the agricultural good falls and the real wage in terms of the manufactured good rises.
Answer: c. Workers may be better off or worse off because the real wage in terms of the agricultural good rises and the real wage in terms of the manufactured good falls.
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Refer to the table below for a certain product's market in Econland. If the world price for this product were $6, then Econland would import:
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