In the twosector (manufacturing and agriculture)
Specificfactors model, diminishing returns to labor
Implies:
A)that the country's production possibilities frontier is linear (a straight line).
B)that the country's production possibilities frontier is concave to the origin (bowed out from the origin).
C)that the country's production possibilities frontier is convex from the origin (bowed in toward the origin).
D)that the country's production possibilities frontier may be either concave to or convex from the origin.

Question

In the two­sector (manufacturing and agriculture)
Specific­factors model, diminishing returns to labor
Implies:
A)that the country's production possibilities frontier is linear (a straight line).
B)that the country's production possibilities frontier is concave to the origin (bowed out from the origin).
C)that the country's production possibilities frontier is convex from the origin (bowed in toward the origin).
D)that the country's production possibilities frontier may be either concave to or convex from the origin.

Quizplus · Accepted Answer

Diminishing returns to labor in the specific-factors model imply that as more labor is added to either sector, the marginal product of labor eventually decreases. This leads to a concave production possibilities frontier because as more and more labor is added to agriculture, for example, the additional output gained from each additional unit of labor decreases, meaning that more labor must be added to achieve the same increase in output. This results in an increasing opportunity cost of producing manufactured goods as more labor is shifted from manufacturing to agriculture, causing the PPF to be concave to the origin.

In the Two­sector (Manufacturing and Agriculture)

In the Twosector (Manufacturing and Agriculture)