According to the Stolper–Samuelson theorem, international trade for a nation wit

Question

According to the Stolper–Samuelson theorem, international trade for a nation with a relative abundance of skilled labor and a relative scarcity of unskilled labor will tend to: widen or aggravate the income disparity between skilled and unskilled workers. reduce the income disparity between skilled and unskilled workers. lower the wages of both groups of workers. raise the wages of both groups of workers. According to the Stolper–Samuelson theorem, international trade for a nation with a relative abundance of skilled labor and a relative scarcity of unskilled labor will tend to: widen or aggravate the income disparity between skilled and unskilled workers. reduce the income disparity between skilled and unskilled workers. lower the wages of both groups of workers. raise the wages of both groups of workers.

Explanation / Answer

As a general rule, the price of a factor of production will rise if the price of the industry in which that factor is most intensively used rises and it will fall if the price of the product of industry which is less intensive in that factor rises.

Since skilled labour is abundant in this country,the wages of skilled labour will rise.

Third option is correct.

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