Westland and Oceania have just started to trade with each other. Westland exports goods produced with skilled labor and imports goods made with unskilled labor from Oceania. Over time, we would expect that in Oceania the wages of unskilled workers will:

a. Rise, and the wages of skilled labor in Westland will fall.

b. Fall, and the wages of skilled labor in Westland will fall.

c. Rise, and the wages of skilled labor in Westland will rise.

d. Fall, and the wages of skilled labor in Westland will fall.

Question

Business

Alivia

25 August, 00:39

Westland and Oceania have just started to trade with each other. Westland exports goods produced with skilled labor and imports goods made with unskilled labor from Oceania. Over time, we would expect that in Oceania the wages of unskilled workers will:

a. Rise, and the wages of skilled labor in Westland will fall.

b. Fall, and the wages of skilled labor in Westland will fall.

c. Rise, and the wages of skilled labor in Westland will rise.

d. Fall, and the wages of skilled labor in Westland will fall.

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Answers (1)

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Randall Lin · Answer 1

c. Rise, and the wages of skilled labor in Westland will rise.

Explanation:

Westland uses skilled labor to produce export goods and uses unskilled labor to produce import goods from Oceania. Hence the demand for skilled labor increase in Westland and the demand for unskilled labor increase in Oceania. Because of higher demand the wage rate of skilled labor rise in Westland and the wage rate of unskilled labor rise in Oceania. Therefore, option c is correct.

c. Rise, and the wages of skilled labor in Westland will rise.