Italy produces agricultural products and manufactured products, using both labour and capital. Manufacturing is capital-intensive while agriculture is labour-intensive. When Italy engages in free trade, it starts exporting manufactured products. In the long run, which one of the following scenarios is correct? Group of answer choices Italy becomes more capital-abundant. Real rental in the manufacturing industry increases more than the real rental in the agricultural industry. Real wage in Italy falls. Allocation of Italian capital between sectors remains unchanged compared to autarky.

France produces agricultural products and manufactured products, using both labour and capital. When France engages in free trade, it starts exporting manufactured products, which is capital intensive.In the long run, which one of the following scenarios is incorrect?Group of answer choicesFrance remains capital abundant.Real wage in France falls.Real rental in the manufacturing industry increases more than the real rental in the agricultural industry.Allocation of French capital changes compared to autarky.

The USA produces agricultural products using land and manufactured products using capital. When the USA engages in free trade, it starts exporting manufactured products, (the price of manufactured products in the US increases). In the short run, which one of the following scenarios takes place? Group of answer choices Both nominal and real returns on land increase Nominal return on land decreases while real return on land remains the same Nominal return on capital increases while real return on capital falls Nominal returns on both land and capital increase Both nominal and real returns on land decrease

Consider an open, trading economy with two sectors: agriculture and production of cars. There are two factors used in the production of both industries: labor, mobile between the industries, land specific to agricultural production and capital specific to the production of cars. Workers spend most of their earnings on cars. Formation of free trade area led the decrease in the prices of both goods by 5%. Which one of these observations will apply? Group of answer choices The labor/capital ratio increases in both sectors in both sectors The manufacturing sector now uses relatively more labor None of the other three options are correct Labor force allocation remains the same

Japan produces electronics and cars. Dedicated capitals are required in these two industries, while labour can flow freely between them. Japan exports cars. The world relative price of cars increased due to higher than expected demand. In the short run, we expect thatGroup of answer choicescapitals are reallocated to the car industry.car industry output increases.marginal product of capital increases in the electronics industry.car industry pays higher nominal wage than electronics industry.

A product is produced in a monopolistically competitive industry with scale economies. If thisindustry exists in two countries, and these two countries engage in trade with each other, then wewould expectA) the country with a relative abundance of the factor of production in which production of theproduct is intensive will export this product.B) the countries will trade only with other nations they are not in competition with.C) the country in which the price of the product is lower will export the product.D) neither country will export this product since there is no comparative advantage.E) each country will export different varieties of the product to the other.