The "magnification effect" refers to the fact that, when a country is opened to trade,
A) the price of the export good rises.
B) real income is magnified even though the PPF does not change.
C) the price of the abundant factor rises faster than does the price of the export good.
D) the price of the scarce factor rises.

Question

Quizplus · Accepted Answer

The magnification effect in trade theory suggests that the price of the abundant factor in a country rises more than the price of the export good when the country opens to trade. This is because the abundant factor is used more intensively in the production of the export good, leading to a greater increase in its demand and price.

The "Magnification Effect" Refers to the Fact That, When a Country