The specific-factors model concludes that if there is an increase in the relative price (and an expansion) of one industry, the factor specific to that industry:
A) will experience an increase in its marginal product.
B) will experience a decrease in its marginal product.
C) will be transferred to other industries.
D) will have competition as additional units of that specific factor are hired from other industries.

Question

Quizplus · Accepted Answer

In the specific-factors model, an increase in the relative price of a good leads to an increase in the demand for the specific factor used in its production, raising its marginal product.

The Specific-Factors Model Concludes That If There Is an Increase