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Suppose that the Home country in the two-sector (manufacturing and agriculture) specific-factors model has a comparative...

Suppose that the Home country in the two-sector (manufacturing and agriculture) specific-factors model has a comparative advantage in Suppose that the Home country in the two-sector (manufacturing and agriculture) specific-factors model has a comparative advantage in

It will rise.

It will first fall, then rise.

It will fall.

It will not change.

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Answer #1

The Home country has two sectors manufacturing and agricukture. Manufacturing uses capital and Agriculture uses land.  

According to Specific factors model, the inputs (capital and land) cannot be interchanged between the two sectors. When trade opens, the The return on export sector input rises while return on import competing sector falls.

If the home country has comparative advantage in manufacturing-

D) The return on capital will rise and the return on land will fall.

If the home country has comparative advantage in agriculture-

D) The return on land will rise and the return on capital will fall.

If it helps kindly upvote

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