In the specific factors model, a country's production possibility frontier is ________ because of ________.
A) a straight line; diminishing marginal returns
B) a curved line; diminishing marginal returns
C) a straight line; constant marginal returns
D) a curved line; constant marginal returns
E) a curved line; a limited supply of labor

Question

Quizplus · Accepted Answer

The specific factors model assumes that there are two factors of production, one of which is mobile (such as capital) and one of which is specific to a particular industry (such as labor). Therefore, as a country specializes in producing a specific good, the specific factor becomes increasingly scarce relative to the mobile factor, leading to diminishing marginal returns and a curved production possibility frontier.

In the Specific Factors Model, a Country's Production Possibility Frontier