Chapter 5

Chapter 5:
Who Gains and Who Loses From Trade

Multiple Choice Questions
1. Which of the following is NOT true about trade?
Trade will cause expansion in the export-oriented sector. Trade will cause contraction in the
import-competing sector. Trade occurs because of similarities in the availability of factor inputs
across countries and differences in the proportions of those factors that are used in producing
different products. None of the above.
ANSWER:
According to the Stolper-Samuelson theorem, in the short-run, following the opening of trade:
Workers can change jobs but will receive the same wage. Workers will suffer from lower wages
but land owners will benefit from higher rents. All groups tied to declining sectors of the
economy will suffer from lower returns. Output remains constant.
ANSWER:
According to the Heckscher-Ohlin theorem, in the short-run, following the opening of trade:
a.
Inputs are mobile across sectors, but input returns remain constant.
b.
Capital and labor will move to better-paying sectors.
c.
Land owners will benefit from higher rents.
d.
Workers will experience lower wages due to cheap imports.
ANSWER:
The theory that predicts that trade occurs because of differences in the availability of factor
inputs across countries and the differences in the proportions in which the factor inputs are used
in producing different products is called:
a.
The Stolper-Samuelson theory.
b.
The Heckscher-Ohlin theory.
c.
Comparative advantage.
d.
Absolute advantage.
ANSWER:
Trade occurs because of __________ in the availability of factor inputs across countries and the
differences in the proportions of those factors that are used in producing different goods. Trade
International economics
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causes __________ in the export-oriented sector and __________ in the import-competing

sector.
a.
differences; expansion; contraction
b.
similarities; expansion; contraction
c.
similarities; contraction; expansion
d.
differences; contraction; expansion
ANSWER:
In the long-run, following the opening of trade, a labor-abundant country will:

a.
Employ less labor than it did pre-trade.
b.
Produce goods using a higher land to labor ratio than it did pre-trade.
c.
Produce goods using a lower land to labor ratio than it did pre-trade.
d.
Experience higher rents and wages.
ANSWER:
The opening of trade between a land-abundant country and a labor-abundant country should lead
to:
a.
Higher rents and wages in both countries.
b.
Lower rents and wages in both countries.
c.
Higher rents in the labor-abundant country and higher wages in the land-abundant country.
d.
Lower rents in the labor-abundant country and lower wages in the land-abundant country.
ANSWER:
Given the assumptions of the Heckscher-Ohlin model, the opening of trade in a land-abundant
country will cause the domestic price of wheat to:
a.
Fall.
b.
Rise.
c.
Be unaffected.
d.
At first rise but then fall back to its original level.
ANSWER:
The Stolper-Samuelson theorem states that given certain assumptions and conditions:
a.
The real return to the factor used intensively in the import-competing industry will rise in
the long-run.
b.
The real return to the factor used intensively in the export industry will fall in the long-run.
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c.
The real return to the factor used in the rising price industry will rise in the long-run.
d.
The real return to the factor used intensively in the export industry will rise in the long-run.
ANSWER:
If the domestic country is labor abundant, which of the following groups will gain in the shortrun, but lose in the long-run? Domestic landowners in the farming sector. Domestic landowners
in the cloth-making sector. Foreign landowners in the farming sector. Foreign workers in the
cloth-making sector.
ANSWER:
The Stolper-Samuelson theorem would predict that trade between the United States, a capitalabundant country, and Mexico, a labor-abundant country, should lead to:
a.
Higher wages in both countries.
b.
Lower wages in both countries.
c.
Higher wages in Mexico.
d.
Lower wages in Mexico.
ANSWER:
According to the factor-price-equalization theorem, free trade equalizes:

a.
Product prices as well as the prices of individual factors of production between two
countries.
b.
Product prices between two countries but not the prices of individual factors of production.
c.
Product prices between two countries and factor prices within each country but not
between countries.
d.
Product prices and factor prices within each country but not between countries.
ANSWER:
The factor-price-equalization theorem tells us that free trade between two countries should lead
to:
a.
All workers in the two countries earning the same wage rate.
b.
All workers in the two countries having the same skill level.
c.
All workers of the same skill level earning the same wage rate in the two countries.
d.
All factors of production earning the same amount within each country.
ANSWER:
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According to the Stolper-Samuelsom theorem, an increase in the price of a countrys imports

would:
a.
Lower the returns to all factors of production within the country.
b.
Raise the returns to all factors of production within the country.
c.
Lower the returns to the factor of production used relatively intensively in the import-
competing industry.
d.
Raise the returns to the factor of production used relatively intensively in the import-
competing industry.
ANSWER:
According to the Stolper-Samuelsom theorem, a decrease in the price of a countrys exports

would:
e.
Lower the returns to all factors of production within the country.
a.
Raise the returns to all factors of production within the country.
b.
Lower the returns to the factor of production used relatively intensively in the export
industry.
c.
Raise the returns to the factor of production used relatively intensively in the export
industry.
ANSWER:
With free trade, if Country X is relatively labor abundant and relatively land scarce and Country
Y is relatively labor scarce and relatively land abundant, the factor-price equalization theorem
predicts that:
a.
Land rents will rise in Country X and fall in Country Y until they equalize.
b.
Land rents will fall in Country X and rise in Country Y until they equalize.
c.
Wages will rise in Country X and fall in Country Y until they equalize.
d.
Both a and c.
ANSWER:
Use the following information to answer questions 17 thru 22.

The following cost data is for the mythical land of Painduvin, a capital-abundant country where
they produce nothing but bread and wine using only capital and labor as inputs.
1 unit of Bread
1 unit of Wine
Capital Input
5 euros
20 euros
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Labor Input
4 euros
10 euros
Based on the information above, bread is __________ intensive and wine is __________
intensive?
a.
Capital; labor
b.
Capital; capital
c.
Labor; capital
d.
Labor; labor
ANSWER:
Painduvin has a comparative advantage in the production of:

a.
Both bread and wine.
b.
Neither bread nor wine.
c.
Wine.
d.
Bread.
ANSWER:
The opening up of free trade would cause the price of bread to __________ and the domestic
price of wine to __________ in Painduvin.
a.
Rise; fall
b.
Fall; rise
c.
Rise; rise
d.
Fall; fall
ANSWER:
Following the opening of trade, Painduvin would export __________ and import __________.
a.
Bread; wine
b.
Wine; bread
c.
Both goods; neither good
d.
Neither good; both goods
ANSWER:
If capital and labor were completely immobile within Painduvin (a short-run assumption), which
group(s) in France would gain and which group(s) would lose from going from a situation of no
trade to a situation of free trade?
a.
Both capital and labor would gain.
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b.
Both capital and labor would lose.
c.
Capital and labor in the bread industry would gain while capital and labor in the wine
industry would lose.

d.
Capital and labor in the bread industry would lose while capital and labor in the wine
industry would gain.

ANSWER:
If capital and labor were completely mobile within Painduvin (a long-run assumption), which
group(s) in France would gain and which group(s) would lose from going from a situation of no
trade to a situation of free trade?
a.
Capital would gain while labor would lose.
b.
Capital would lose while labor would gain.
c.
Capital and labor in the bread industry would gain while capital and labor in the wine
industry would lose.

d.
Capital and labor in the bread industry would lose while capital and labor in the wine
industry would gain.

ANSWER:
When Wassily Leontief tested the predictions of the Heckscher-Ohlin theory, he found that in
1947 the United States was exporting relatively labor-intensive goods and importing relatively
capital-intensive goods. This finding:
a.
Contradicted the Heckscher-Ohlin theory as the United States was relatively capital-
abundant.
b.
Contradicted the Heckscher-Ohlin theory as the United States was relatively labor-
abundant.
c.
Was never duplicated by other studies and has thus been labeled a paradox.
d.
Fit the predictions of the Heckscher-Ohlin theory concerning the trading patterns of a
capital-abundant country.
ANSWER:
Which of these facts contradicts the predictions of the Heckscher-Ohlin theory?

a.
The United States is a net exporter of products that use highly skilled labor relatively
intensively.
b.
The United States is a net exporter of products that use farmland relatively intensively.
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c.
The United States is a net importer of certain natural resources such as petroleum.
d.
The United States is a net importer of products that use capital relatively intensively.
ANSWER:
China is a net importer of:

a.
Shoes and other footwear.
b.
Scientific equipment.
c.
Toys.
d.
Clothing and accessories.
ANSWERS:
Use the following information to answer questions 26 thru 34.

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.
The pre-trade relative wage rate (relative to land rents) in Alpha is __________ than the relative
wage rate in Beta.
a.
Greater
b.
Less
c.
Relative wages are the same in the two countries.
d.
There is not enough information to answer.
ANSWER:
The pre-trade price of food in Alpha is __________ than the price of drink in Alpha while the
pre-trade price of food in Beta is __________ than the price of drink in Beta.
a.
Greater; greater
b.
Less; less
c.
Greater; less
d.
Less; greater
ANSWER:
Alpha has a comparative advantage in the production of:

a.
Drink.
b.
Food.
c.
Both goods.
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d.
Neither good.
ANSWER:
Beta has a comparative advantage in the production of:

a.
Drink.
b.
Food.
c.
Both goods.
d.
Neither good.
ANSWER:
When trade opens, Alpha will export __________ and import __________.
a.
Food; drink
b.
Drink; food
c.
d.
ANSWER:
When trade opens, Beta will export __________ and import __________.
a.
Food; drink
b.
Drink; food
c.
d.
ANSWER:
When trade opens, the price of food will __________ in Alpha and __________ in Beta.
a.
Rise; rise
b.
Rise; fall
c.
Fall; fall
d.
Fall; rise
ANSWER:
Which groups gain and which groups lose in the short-run following the opening of trade?
a.
Workers in both countries gain while land owners in both countries lose.
b.
Workers in both countries lose while land owners in both countries gain.
c.
Workers and land owners in the food industry gain in Beta while workers and landowners
in the drink industry lose in Beta.

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d.
Workers and land owners in the food industry gain in Alpha while workers and landowners
in the drink industry lose in Alpha.

ANSWER:
Which groups gain and which groups lose in the long-run following the opening of trade?
a.
Workers in Alpha gain while land owners in Alpha lose.
b.
Workers in Beta gain while land owners in Beta lose.
c.
Workers and land owners in the food industry gain in Beta while workers and landowners
in the drink industry lose in Beta.

d.
Workers and land owners in the food industry gain in Alpha while workers and landowners
in the drink industry lose in Alpha.

ANSWER:
If the price of corn increases by 15% and the price of shoes remains constant, the StolperSamuelson theorem predicts that:
a.
The rental rate of land increases by 15%.
b.
The rental rate of land increases by more than 15%.
c.
The wage rate will increase.
d.
The wage rate will stay the same.
ANSWER:
The following equations describe the long-run situation for prices and costs, where the numbers
indicate the amounts of labor and land needed to produce a unit of wheat and cloth. w is the
wage rate and r is the rental rate.
Price of wheat = 1w + 2r
Price of cloth = 2w + 1r
The production of wheat is __________ intensive and the production of cloth is__________
intensive. land; labor labor; land land; land labor, labor
ANSWER:
Assume that initially the price of wheat is $3 and the price of cloth is also $3.
The wage rate w is __________ and the rental rate r is __________. 1; 1 1; 2 1/2; 1 1/2; 1/2
ANSWER:
The labor cost per unit of cloth output is __________ and the rental cost per unit of cloth output
is __________. 3/2; 1/2 1/2; 1 2; 1 1; 1
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ANSWER:
The labor cost per unit of wheat output is__________ and the rental cost per unit of wheat output
is __________. 1/2; 3/2 1; 1/2 1; 2 2; 2
ANSWER:
As a result of international trade the price of cloth now increases to $4. The price of wheat stays
the same. Factor prices adjust to the new long-run situation.
The new value for the wage rate w is __________ and the new value for the rental rate r is
__________. 3/8; 7/8 1/5; 2/5 5/3; 2/3 4/7; 3/7
ANSWER:
As a result of the change in the price of cloth, the purchasing power of labor income:
a. Rises with respect to wheat and falls with respect to cloth.
b.
Rises with respect to both goods.
c. Falls with respect to both goods.

Rises with respect to cloth and falls with respect to wheat.
ANSWER:
As a result of the change in the price of cloth, the purchasing power of land income:
a.
Rises with respect to automobiles and falls with respect to oranges.
b.
Rises with respect to both goods.
c.
Falls with respect to both goods.
d.
Rises with respect to oranges and falls with respect to automobiles.
ANSWER:
True/False Questions
When factors of production move to better-paying sectors of the economy following the opening
of trade, wages and rents will be bid back to their pre-trade levels.
ANSWER:
FALSE
According to the Stolper-Samuelson theorem, the opening of trade will lead to lower real wages
in a land-abundant country.
ANSWER:
FALSE:
Trade makes some people absolutely better off and others absolutely worse off in each of the
trading countries. However, the gainers and losers in the short-run are somewhat different from
those in the long-run, because more adjustment can occur in the long-run.
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ANSWER:
TRUE
The factor-price equalization theorem implies that laborers will end up earning the same wage
rate in all countries only if migration between the countries is allowed.
ANSWER:
FALSE
International trade patterns are broadly consistent with the Heckscher-Ohlin prediction that
nations tend to export the products that use their abundant factors intensively.
ANSWER:
TRUE
While Chinas exports are consistent with the predictions of the Heckscher-Ohlin theory, her
imports are not.
ANSWER:
FALSE
In the short-run after trade opens, wages and land rents can be expected to rise in the expanding
sector.
ANSWER:
TRUE
Free trade can be expected to cause a decrease in the real incomes of the owners of the factor
used intensively in the import-competing industry.
ANSWER:
TRUE
Factor-price equalization theory predicts that the price of labor and land within a country will
equalize.
ANSWER:
FALSE
The United States is a net exporter of skilled labor.

ANSWER:
TRUE
The factor-price equalization theorem states that, with the opening of trade, wages across
countries will equalize even though workers are not allowed to migrate.
ANSWER:
TRUE
According to the specialized-factor patter, the more a factor is concentrated in the production of a
product, the more it stands to gain from an increase of the price of this product.
ANSWER:
TRUE
According to the Stolper-Samuelson theorem, there are gainers and loser within a country as a
result of opening of free trade.
ANSWER:
TRUE
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According to the Stolper-Samuelson theorem, workers gain from opening of free trade only in
the long run, and not in the short run, because wages will adjust only in the long run.
ANSWER:
FALSE
In the long run, gainers and loser of trade are defined by the product sector they are employed in,
rather than the factors of production they own.
ANSWER:
FALSE
Essay Questions
Hollywoodland, being self-sufficient in most products, trades only two goods with the Rest of
the World (ROW), movies and automobiles. Both of these goods are produced using skilled labor
(L) and capital (K) with the returns to capital assumed to be the interest rate (r) and the returns to
skilled labor being the wage rate (w). The production of automobiles is capital intensive relative
to the production of movies and Hollywoodland is skilled-labor abundant relative to the ROW.
a.
State the Heckscher-Ohlin Theorem and use it to predict the pattern of trade between
Hollywoodland and the ROW.

POSSIBLE RESPONSE: According to the Heckscher-Ohlin theory, Hollywoodland will export
movies, the relatively skilled-labor intensive product, and will import automobiles, the relatively
capital intensive product. This is because Hollywoodland is rich in skilled labor and scarce in
capital.
b.
If the price of imports coming into Hollywoodland were to rise, what would happen to the
factor returns in Hollywoodland? State the theorem used to come up with your answer and,
briefly, the intuition behind the theorem.
POSSIBLE RESPONSE: The effects of the rising price of imports are described by the StolperSamuelson theorem. When the price of automobiles rises, in long-run equilibrium, the real return
to the factor used intensively in the rising-price industry (in this case capital) will rise, and the
real return of the other factor (skilled labor) will fall. What is the intuition behind this theorem?
When the price of automobiles rises, this will bid up the returns of at least one of the factors
employed in the automobile industry. It is likely to raise the interest rate because capital is used
intensively in the production of cars. On the other hand, the price of movies remains the same,
and since the price reflects the returns on capital and skilled labor, the real wage must decrease.
As a result of the North America Free Trade Agreement (NAFTA), the United States and Canada
have shifted to free trade with Mexico. Assuming that Mexico has an abundance of unskilled
Page 12
labor while the United States and Canada have an abundance of skilled labor, according to the
Stolper-Samuelson theorem, how should this shift have affected the real wage of unskilled labor
in Mexico and the real wage of unskilled labor in the United States and Canada? How should it
have affected the real wage of skilled labor in Mexico and skilled labor in the United States and
Canada? Clearly explain why wages will change in the way you have suggested.
POSSIBLE RESPONSE: The North American Free Trade Agreement removes the trade barriers
between Mexico, the United States, and Canada. The shift to free trade with Mexico leads to an
equalization of the product prices in these countries. The change in the product prices leads to a
change in the prices of factors of production. Each country will export the goods which
intensively use its abundant factors of production, and import the goods which use its scarce
factors of production. In this particular case, Mexico will export goods which require the
intensive use of unskilled labor, and will import the goods which require skilled labor in their
production. Compared to the situation before the opening of trade, the price goods requiring the
intensive use of unskilled labor will go up, and price of goods requiring intensive use of
unskilled labor will go down. In the long run this will cause an adjustment in the return of the
different factors of production. The Stolper-Samuelson theorem asserts that wages of unskilled
labor will increase in Mexico, and wages of skilled workers will decrease. The United States and
Canada will experience the opposite trend. In its strong version, the Stolper-Samuelson theorem
predicts that wages of skilled and unskilled workers will equalize across countries in the long
run.
The following equations describe the long-run situation for prices and costs, where the numbers
indicate the amounts of labor and land needed to produce a unit of corn and toys.
Pcorn = 80w + 40r
Ptoys = 100w + 30r
a.
If the price of corn is initially 200 and the price of toys is initially 200, what are the values
for the wage rate w and the rental rate r? What is the labor cost per unit of corn output? Per unit
of toys? What is the rental cost per unit of corn? Per unit of toys?
POSSIBLE RESPONSE: To answer this question we need to simultaneously solve the equations:
200 = 80w + 40r
200 = 100w + 30r
The solution is w=1.25 and r=2.5. The labor cost per unit of corn output is
Page 13
80 x 1.25=100, and the labor cost per unit of toys is 100 x 1.25=125. The rental cost per unit of
corn is 100, and the rental cost per unit of toys is 75.
b.
The price of corn now increases to 240. The price of toys stays the same. What are the new
values for w and r after adjustment to the new long-run situation?

POSSIBLE RESPONSE: To answer this question we need now to simultaneously solve the
equations:
240 = 80w + 40r
200 = 100w + 30r
The solution is w=0.5 and r=5.
c.
What is the change in the real wage (purchasing power of labor income) with respect to
each good? Is the real wage higher or lower "on average"? What is the change in the real rental
rate (purchasing power of land income) with respect to each good? Is the real rental rate higher
or lower "on average"?
POSSIBLE RESPONSE: When the initial value of the two goods is 200, the real wage with
respect to corn is 1.25/200=0.0075, and with respect to toys is 1.25/200=0.0075. With the new
value of corn being 240, the real wage with respect to corn is 0.5/240=0.002 and with respect to
toys is 0.5/200=0.0025. The purchasing power of labor income decreases in terms of both goods.
When the initial value of the two goods is 200, the real rental rate buys 2.5/200=0.0125 units of
corn and 2.5/200=0.0125 units of toys. With the new value of corn being 240, the real rental rate
buys 5/240=0.02 units of corn and 0.025 units of toys. The purchasing power of land income
increases with respect to both goods.
d.
Relate your conclusions in part c to the Stolper-Samuelson theorem.
POSSIBLE RESPONSE: Our findings are consistent with the Stolper-Samuelson theorem. This
theorem asserts that, as the price of corn increases, the real return (rent) of the factor used
intensively in the production of corn (land) increases, and the real return (wage) of the factor
used intensively in the production of toys (labor) falls.
Outsourcing, the exporting of jobs from one country to another, was not an issue when the factorprice-equalization theory was developed. Does the existence of outsourcing change the
implications of the theory? Why or why not?
POSSIBLE RESPONSE: The theory of Heckscher and Ohlin, and the subsequent theory of
Stolper and Samuelson did not assume that factors of production are mobile across countries.
Page 14
Yet, this is not the essence of their theory. The main objective of this theory is to demonstrate
that factor prices (in particular, wages) will equalize across countries even if factors of
production do not migrate from one country to another. Free trade alone is capable of generating
this effect of factor price equalization.
The new phenomenon of international outsourcing reinforces rather than contradicts this theory.
International outsourcing, which is a process of shifting business activities abroad, can be
considered a form of international trade whereby industrialized countries import services such as
bookkeeping, call centers, software development, etc. from countries such as India and China.
These countries are rich in factor intensively used in the production of these services (workers
with particular skills). And just as the theory of Stolper and Samuelson predicts, the real wages
of workers employed by those sectors in the U.S. will decrease, and the real wage of workers in
China and India will increase. This is the type of trend observed since international outsourcing
leapt into prominence in the early 2000s.
Country X is relatively labor abundant and relatively land scarce. Country Y is relatively labor
scarce and relatively land abundant. The production of corn is relatively land intensive. The
production of shoes is relatively labor intensive. Explain the short- and long-run effects on the
incomes of: workers employed in the production of corn in each country, workers employed in
the production of shoes in each country, land used in the production of corn in each country, and
land used in the production of shoes in each country.
POSSIBLE RESPONSE: The effect that will be observed in the short run as a result of opening
to international trade is the equalization of the product prices in the two countries. Once prices
have responded to free trade, the production in the two countries will respond to the new prices.
Country X will extend its production of shoes and Country Y will extend its production of corn.
In the short run, the resources in Country X involved in the production of shoes gain, and the
resources involved in the production of corn lose. In Country Y the reverse trend is observed.
The resources involved in the production of shoes lose, and the resources involved in the
production of corn gain.
In the long run, there will be change in the national factor markets in the two countries. Because
Country X exports shoes, and the production of shoes is labor-intensive, wages in Country X
rise, and rent falls. In Country Y again the reverse trend is observed: wages will fall and rents
will go up.
Page 15
Explain the weak and the strong form of the factor-price equalization theory of Heckscher and
Ohlin, and discuss its real world relevance.
POSSIBLE RESPONSE: According to the Heckscher-Ohlin theory, factor prices will equalize
across countries as a result of free trade. That is, wages will become equal across countries, and
the returns on capital will also equalize. There is little evidence in the world of this strong form
of factor-price equality. The reason is that many assumptions of this model are not satisfied.
Countries use different production technologies, trade is not completely free, e.g. countries
impose different barriers to free trade (tariffs, quotas, etc.), and not all goods and services are
traded internationally (e.g. haircuts, health care, etc.).
The weak form of this theorem states that, as a result of opening of free trade, factor prices will
tend to converge over time across countries. There is much more evidence for this form of factor
price convergence. For instance, wage rates in the industrialized countries of Asia (e.g Singapore,
South Korea) are approaching the ones in the Western countries for comparable types of worker
skills.
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Chapter 5:

Who Gains and Who Loses From Trade

Capital and labor will move to better-paying sectors.

Land owners will benefit from higher rents.

Workers will experience lower wages due to cheap imports.

The Stolper-Samuelson theory.

The Heckscher-Ohlin theory.

causes __________ in the export-oriented sector and __________ in the import-competing

differences; expansion; contraction

similarities; expansion; contraction

similarities; contraction; expansion

differences; contraction; expansion

In the long-run, following the opening of trade, a labor-abundant country will:

Employ less labor than it did pre-trade.

Experience higher rents and wages.

Higher rents and wages in both countries.

Lower rents and wages in both countries.

At first rise but then fall back to its original level.

Higher wages in both countries.

Lower wages in both countries.

Higher wages in Mexico.

Lower wages in Mexico.

According to the factor-price-equalization theorem, free trade equalizes:

According to the Stolper-Samuelsom theorem, an increase in the price of a countrys imports

Lower the returns to all factors of production within the country.

Raise the returns to all factors of production within the country.

According to the Stolper-Samuelsom theorem, a decrease in the price of a countrys exports

Lower the returns to all factors of production within the country.

Raise the returns to all factors of production within the country.

Use the following information to answer questions 17 thru 22.

Painduvin has a comparative advantage in the production of:

Both bread and wine.

Neither bread nor wine.

Both goods; neither good

Neither good; both goods

Both capital and labor would gain.

Both capital and labor would lose.

industry would lose.

industry would gain.

Capital would gain while labor would lose.

Capital would lose while labor would gain.

industry would lose.

industry would gain.

Which of these facts contradicts the predictions of the Heckscher-Ohlin theory?

China is a net importer of:

Shoes and other footwear.

Clothing and accessories.

Use the following information to answer questions 26 thru 34.

Relative wages are the same in the two countries.

There is not enough information to answer.

Alpha has a comparative advantage in the production of:

Beta has a comparative advantage in the production of:

Both goods; neither good

Neither good; both goods

Both goods; neither good

Neither good; both goods

in the drink industry lose in Beta.

in the drink industry lose in Alpha.

Workers in Alpha gain while land owners in Alpha lose.

Workers in Beta gain while land owners in Beta lose.

in the drink industry lose in Beta.

in the drink industry lose in Alpha.

The rental rate of land increases by 15%.

The rental rate of land increases by more than 15%.

causes in the export-oriented sector and in the import-competing