(Table: Data on Suburbia) Which of the following
Statements is TRUE regarding the change in the marginal
Product of labor as Suburbia moved from autarky to a free
Trade situation?
A)The MPL in good X production rose.
B)The MPL in good Y production fell.
C)The MPL in good X and good Y production both rose
D)The MPL in good X and good Y production both fell.

Question

(Table: Data on Suburbia) Which of the following
Statements is TRUE regarding the change in the marginal
Product of labor as Suburbia moved from autarky to a free­
Trade situation?
A)The MPL in good X production rose. 
B)The MPL in good Y production fell. 
C)The MPL in good X and good Y production both rose 
D)The MPL in good X and good Y production both fell.

Quizplus · Accepted Answer

In a free-trade situation, Suburbia can now import good Y at a lower price than it can produce itself. This leads to a shift in resources from the production of good Y to the production of good X. As a result, the marginal product of labor in good X production increases due to the increase in resources allocated to it. However, the MPL in good Y production may also increase due to the specialization of resources in good X production leading to greater efficiency in good Y production. Therefore, the correct answer is (C) The MPL in good X and good Y production both rose.

(Table: Data on Suburbia) Which of the Following