Suppose that the Home country in the twosector (manufacturing and agriculture) specificfactors model has a comparative advantage in manufactured 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 worse off because the nominal wage decreases.
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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