1.In the specific-factors model, an increase in the amount of labor
used in manufacturing will ____________ the marginal product of ____________ used in the production of agriculture.
a. Increase; land
b. Decrease; capital
c. Increase; labor
d. Decrease; labor
2.A(n) ____________ in the price of agriculture leads to a less than proportional ____________ in the nominal wage paid to workers.
a. decrease; increase
b. increase; decrease
c. decrease; decrease
3.Brazil and Chile produce coffee and wine using land and labor. Labor is mobile between the sectors, however, coffee beans and wine require different soil and climate. This means that some land is good only for growing coffee beans and some land is only good for growing wine grapes. Brazil is relatively abundant in (has more) coffee-growing land, while Chile is relatively abundant (has more) in wine grape growing land. Preferences are identical in both countries. Assume both countries are in autarky. In an effort to work harder and have fewer hangovers, consumers in both countries increase their demand for coffee and reduce their demand for wine. Which of the following statements is true.
a. The price of coffee should rise relative to the price of wine.
b. The output of wine should rise in both countries.
c. The output of coffee in Brazil should decrease.