In the two-sector specific-factors model, as more labor is added to a sector, we will see:
A) the total product of labor decrease.
B) the marginal product of labor increase.
C) the average product of labor remains constant.
D) the marginal product of labor decrease.

Question

Quizplus · Accepted Answer

According to the two-sector specific-factors model, as more labor is added to a sector, the marginal product of labor will eventually decrease due to the law of diminishing returns. This means that each additional unit of labor that is added will result in a smaller increase in output than the previous unit of labor. While the total product of labor may initially increase with more labor, it will eventually reach a point where it begins to decrease. The average product of labor may remain constant or may decrease depending on the specific production function.

In the Two-Sector Specific-Factors Model, as More Labor Is Added