China’s Wages on the Rise, and Workers Grow Scarce

1. China has a one-child policy, in which families are given incentives to have only one child. Will this policy help, or exacerbate, the problem identified in the article? Why?

This will exacerbate the problem, as the one-child policy will only constrict the supply of labor further.

2. Assuming that this labor trend in China continues, what might be the impact on wages in the US? Why do you think this?

It’s possible that wages in the US will increase, in response to the increases

3. As wages in China continue to rise, what will happen to China’s comparative advantage in production of goods with low-skilled labor?

The comparative advantage will continue to erode.

Multiple Choice/True False Questions

1. According to the article, wages in China are increasing because
  1. Supply is rising faster than demand is rising.
  2. Supply is falling faster than demand is falling
  3. Supply is rising more slowly than demand is rising.
  4. Supply is falling more slowly and demand is falling.
      ANS. c

2. The cost of Chinese goods in the US is rising because:

  1. Production costs are rising
  2. Demand is falling
  3. Supply is falling
  4. Both A and B
      ANS. a

3. According to the article, China faces a labor shortage throughout its economy.

  1. True
  2. False
      ANS. b

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