In the specific-factors model, suppose that a country has a comparative advantage in manufacturing output. Will landowners be better or worse off following the opening of trade with other countries?
A) They will be better off.
B) They will be worse off.
C) They may be better off or worse off because the real rental on capital in terms of the agricultural good rises and the real rental in terms of the manufactured good falls.
D) They may be better off or worse off because the real rental on capital in terms of the manufactured good rises and the real rental in terms of the agricultural good falls.

Question

Quizplus · Accepted Answer

In the specific-factors model, a country with a comparative advantage in manufacturing output leads to an increase in demand for capital and labor in the manufacturing sector. This causes a decrease in demand for land in the agricultural sector, leading to a decrease in the rental price of land. Therefore, landowners will be worse off following the opening of trade.

In the Specific-Factors Model, Suppose That a Country Has a Comparative