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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The global financial panic in September 2008 that led to a sharp fall in business investment spending and consumer spending can be viewed as: a. a sharp decrease in aggregate supply
b. a sharp decrease in aggregate demand. c. a sharp decrease in both aggregate supply and aggregate demand. d. a modest increase in aggregate supply. e. a modest increase in both aggregate demand and aggregate supply.
In the short run, a perfectly competitive firm _____
a. cannot change its costs of production if it buys its inputs from a perfectly competitive market b. can increase the value of its unique product by increasing its advertisement expenditure c. can decrease the price of a good in order to increase its share in the market d. cannot choose to produce the quantity it wants