Question

Suppose that the home country in the two-sector (manufacturing and agriculture) specific-factors model has a comparative advantage in manufacturing output. What will happen to the relative price of manufactured output when trade occurs?

Answer 1

Answer:

Explanation:

In a situation such as this one the individual workers and their families may be better off or may actually do worse due to the real wage rises in terms of agricultural goods but the real wage in terms of the manufactured goods will actually fall. Therefore it depends on the worker's unique situation and in which sector they are in which determines if they are better or worse.