Consider two countries, h and f, using only labour to produce N goods with different technologies. Preferences are the same in both countries and feature the same expenditure share (1/N) in each good. Initially, under free trade, country h produces and exports one half of the goods, while f produces and exports the remaining one half, and the wage of country h is equal to the wage of country f. After some time, both countries still have the same wage. However, country f produces and exports three quarters of the goods, while country h produces and exports the remaining quarter. This is due to: a. an increase in the relative size of country h accompanied by technological progress in country f that increased its relative productivity in all sectors b. an increase in the relative size of country f accompanied by technological progress in country h that increased its relative productivity in all sectors c. an increase in the relative size of country f accompanied by technological progress in country f that increased its relative productivity in all sectors d. technological progress in country f that increased its relative productivity by 30 percent in all sectors

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c an increase in the relative ... View the full answer