Final answer:
The Stolper-Samuelson theorem applies specifically to inter-industry trade, which involves the trade of goods from different industries across international borders.
Step-by-step explanation:
The Stolper-Samuelson theorem is a central theorem in the field of international economics that deals with the relationship between international trade and income distribution within a country. Specifically, it refers to the impact that trade has on the real income of various factors of production, considering the structure of a country's production industries and tariffs. According to the theorem, an increase in the price of a good will lead to an increase in the real income of the factor that is intensively used in the production of that good, and a decrease in the real income of the other factor.
The correct answer to the student's question is that the Stolper-Samuelson theorem applies only to b. inter-industry trade. Inter-industry trade refers to the international trade of goods that belong to different industries, as opposed to intra-industry trade, where countries import and export goods within the same industry, such as automobiles of different types and qualities. The basis for inter-industry trade lies in differences between countries in factor endowments and technology, leading to specialization and trade that reflects comparative advantage.
In contrast, intra-industry trade involves a focus on extreme specialization and learning in particular kinds of products within the same industry, as well as economies of scale. It typically occurs between countries with similar income levels, well-educated workers, and advanced technologies; and it can involve splitting up the value chain, with different stages of production taking place in different geographic locations.