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12 May, 20:05

Assume the standard trade model with two countries (Alpha and Beta), two goods (food and drink), and two factors of production (land and labor). Further assume that Alpha is relatively labor-abundant and drink is relatively labor-intensive. Which of the following is most likely to happen in the short run following the opening of free trade between the countries? a. All the workers in both the countries will gain while all the land owners in both the countries will lose. b. All the workers in both countries will lose while all the land owners in both the countries will gain. c. The workers and land owners in the food industry in Beta will gain while the workers and the landowners in the drink industry will lose. d. The workers and the land owners in the food industry in Alpha will gain while the workers and the landowners in the drink industry will lose.

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Answers (2)
  1. 12 May, 21:16
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    d. The workers and the land owners in the food industry in Alpha will gain while the workers and the landowners in the drink industry will lose.

    Explanation:

    Free trade is an economic model that advocates the exchange of goods and services between two countries without government intervention and promoting economic freedom for companies to establish these relationships, allowing the costs of trade between two countries to be lower and more free.

    In the question above, we can see that the standard business model with two countries (Alpha and Beta), two goods (food and drink) and two factors of production (land and labor). The Alfa country is labor-abundant and the "drink" activity is labor-intensive, which will create a process of full production, employment and speed of service and product manufacturing in Alfa. With that, as the free market offers total freedom to the industry, we can say that workers and landowners in the food industry in Alpha will win while workers and landowners in the beverage industry will lose.
  2. 12 May, 21:23
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    (c) The workers and land owners in the food industry in Beta will gain while the workers and the landowners in the drink industry will lose

    Explanation:

    Reducing tariffs on imports allows companies to expand to other countries. Nations usually have limited economic resources, and free trade agreements ensure small nations can obtain the economic resources needed to produce consumer goods or services.
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