Suppose that world demand shifts away from agricultural goods toward hightech manufactured goods. If land is specific to agriculture, capital is specific to manufacturing, and labor is mobile between sectors, which of the following is TRUE?
a. The percentage change in capital income is less than the percentage change in labor income.
b. The percentage change in labor income is greater than the percentage change in the relative price of manufacturing goods.
c. The percentage change in capital income is greater than zero.
d. The percentage change in labor income is more than the percentage change in the relative price of manufacturing goods.
Ans: c. The percentage change in capital income is greater than zero.
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