📢 Too many exams? Don’t know which one suits you best? Book Your Free Expert 👉 call Now!

    âš¡ Month End Offer - Flat 52% Off On All Courses! Enroll Now âš¡
    00:00:00 AM Left

    Question

    The Stolper-Samuelson theorem is a result in

    international trade theory. According to this theorem, an increase in the price of a good will:
    A Benefit the owners of the factor of production that is used intensively in the production of that good and harm the owners of the other factor of production. Correct Answer Incorrect Answer
    B Benefit all owners of both factors of production equally. Correct Answer Incorrect Answer
    C Harm the owners of the factor of production that is used intensively in the production of that good and benefit the owners of the other factor of production. Correct Answer Incorrect Answer
    D Have no effect on the distribution of income among different factors of production. Correct Answer Incorrect Answer

    Solution

    The Stolper-Samuelson theorem states that when the price of a good increases, the real income (wage, rent, etc.) of the factor of production used intensively in producing that good will increase, while the real income of the factor used less intensively will decrease.  This reflects how trade impacts income distribution across different factors of production.  For example, if a country is capital-abundant and the price of capital-intensive goods rises, capital owners will benefit, and laborers may lose

    Practice Next
    More Research Questions
    ask-question