In the factor-endowment model,the production possibility curve is assumed to be bowed outward.This is the result of
A) economies of large-scale production
B) constant opportunity cost
C) all factors of production are perfectly substitutable for each other
D) different factor endowments and different factor intensities in the production of the two products

Question

Quizplus · Accepted Answer

The bowed-outward shape of the production possibility curve in the factor-endowment model is the result of different factor endowments and different factor intensities in the production of the two products. A country with more capital relative to labor will have a comparative advantage in producing capital-intensive goods, while a country with more labor relative to capital will have a comparative advantage in producing labor-intensive goods. As a result, the production possibility curve will be bowed outward, indicating increasing opportunity costs as output of one good increases.

In the Factor-Endowment Model,the Production Possibility Curve Is Assumed to Be