Which of the following statements about the specific-factors model is true?
A) When exports of a product rise, the increase in export revenue is divided equally among mobile and specific factors of production.
B) When imports rise, revenues of firms that compete with imports fall. The decrease in revenue is divided equally among the mobile and specific factors of production.
C) When exports of a product rise, factors specific to exports gain less than mobile factors; when imports rise, factors specific to import competing industries gain more than mobile factors.
D) When exports of a product rise, factors specific to exports gain more than mobile factors; when imports rise, factors specific to import competing industries lose more than mobile factors.

Question

Quizplus · Accepted Answer

The specific-factors model suggests that when exports increase, the factors of production specific to the exporting sector (e.g., land for agriculture) benefit more due to the increased demand for their specific output. Conversely, when imports increase, the factors specific to import-competing industries (e.g., labor in manufacturing) are more adversely affected due to the competition from imported goods, leading to potential job losses or reduced income in those sectors.

Which of the Following Statements About the Specific-Factors Model Is