In the twosector (manufacturing and agriculture)
Specificfactors model, the slope of the production
Possibilities curve equals:
A)the ratio of marginal products of capital in the two sectors.
B)the ratio of marginal products of labor utilized in the two sectors.
C)the ratio of outputs produced in the two sectors.
D)the ratio of land and capital utilized in the two sectors.

Question

In the two­sector (manufacturing and agriculture)
Specific­factors model, the slope of the production
Possibilities curve equals:
A)the ratio of marginal products of capital in the two sectors.
B)the ratio of marginal products of labor utilized in the two sectors.
C)the ratio of outputs produced in the two sectors.
D)the ratio of land and capital utilized in the two sectors.

Quizplus · Accepted Answer

In the specific-factors model, the production possibilities curve (PPC) shows the maximum combinations of outputs that a country can produce with its given inputs of labor and capital. The slope of the PPC is determined by the ratio of marginal products of labor utilized in the two sectors, as it is assumed that one sector uses labor-intensive techniques while the other uses capital-intensive techniques. Therefore, the opportunity cost of producing one more unit of output in one sector is the amount of labor that must be diverted from the other sector, which depends on the relative productivity of labor in each sector.

In the Two­sector (Manufacturing and Agriculture)

In the Twosector (Manufacturing and Agriculture)