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Question

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


  1. Abundant factor to rise

  2. Scarce factor to fall

  3. Scarce factor to rise

  4. Both (a) and (b) are possible


Solution

The correct option is C

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.

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