A corollary to the Rybczynski theorem is that, in the long run, prices of factors will not be affected by an increase in labor. This is known as:
A) the Friedman corollary.
B) the Marshall-Lerner condition.
C) the factor price insensitivity result.
D) the Stolper-Samuelson prediction.

Question

Quizplus · Accepted Answer

The factor price insensitivity result states that in the long run, an increase in labor will not affect the prices of factors. This corollary is a result of the Rybczynski theorem, which states that an increase in a factor of production will result in an increase in the output of the industry that uses that factor intensively and a decrease in the output of the other industry. However, in the long run, the prices of factors will adjust such that the relative prices of outputs remain constant, and therefore, an increase in labor will not affect the prices of factors. The other options, including the Friedman corollary, the Marshall-Lerner condition, and the Stolper-Samuelson prediction, do not directly relate to the Rybczynski theorem or the factor price insensitivity result.

A Corollary to the Rybczynski Theorem Is That, in the Long