Question

The Stolper – Samuelson theorem postulates that the imposition of a tariff by a nation causes the real income of the nation’s –

• A. Abundant factor to rise
• B. Scarce factor to rise
• C. Scarce factor to fall
• D. Both (a) and (b) are possible

Answer 1

The correct option is B

Scarce factor to rise

Stolper – Samuelson Theorem explains that real return on scarce factor of the nation increases both in absolute and relative terms when tariff is imposed while the returns on abundant factor declines.