Multiple Choice
Suppose that due to a drought, the price of agricultural goods rises by 10%. If land is specific to agriculture, capital is specific to manufacturing, and labor is mobile between sectors, which of the following is true?
A) The percentage change in labor income is less than zero.
B) The percentage change in labor income is greater than 10%.
C) The percentage change in returns to capital is greater than 10%.
D) The percentage change in labor income is less than 10%.
Correct Answer:
Verified
Correct Answer:
Verified
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