Chapter 4 Specific Factors and Income Distribution 15
d. Owners of capital in Home and owners of land in Foreign will benefit from trade, while owners of
land in Home and owners of capital in Foreign will be hurt. The effects on labor will be ambiguous
5. The real wage in Home is 10, while real wage in Foreign is 18. If there is free movement of labor, then
workers will migrate from Home to Foreign until the real wage is equal in each country. If 4 workers
move from Home to Foreign, then there will be 7 workers employed in each country, earning a real
wage of 14 in each country.
6. If only 2 workers can move from Home to Foreign, there will be a real wage of 12 in Home and
a real wage of 16 in Foreign.
a. Workers in Foreign are hurt as their wage falls from 18 to 16.
7. By restricting immigration, the drop in wages in the high-wage country is not as high as it would
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