The twosector (manufacturing and agriculture) specific
Factors model assumes:
A)that there are increasing returns to labor.
B)that there are diminishing returns to labor.
C)that there are diminishing returns to capital in the agricultural sector.
D)that there are diminishing returns to land in the manufacturing sector.

Question

The two­sector (manufacturing and agriculture) specific­
Factors model assumes:
A)that there are increasing returns to labor.
B)that there are diminishing returns to labor.
C)that there are diminishing returns to capital in the agricultural sector.
D)that there are diminishing returns to land in the manufacturing sector.

Quizplus · Accepted Answer

The two-sector specific-factors model assumes that there are diminishing returns to labor, which means as more labor is added to the production process, the marginal product of labor declines. This assumption aligns with the belief that resources (in this case, labor) are finite and not infinitely available. The model does not assume increasing returns to labor (A), diminishing returns to capital in the agricultural sector (C), or diminishing returns to land in the manufacturing sector (D).

The Two­sector (Manufacturing and Agriculture) Specific­

The Twosector (Manufacturing and Agriculture) Specific