Suppose Country Y Produces Only Corn and Clothing Using Only

Multiple Choice

Suppose country Y produces only corn and clothing using only two inputs- land and labor. Production of corn requires an intensive use of land whereas, clothing is a labor-intensive good. If the price of corn increases by 15 percent, the price of clothing remaining constant, the Stolper-Samuelson theorem predicts that in the long run:

A) the rental rate of land will increase by 15 percent.
B) the rental rate of land will increase by more than 15 percent.
C) the wage rate will increase by more than 15 percent.
D) the wage rate will remain unchanged.