As relative prices in various industries change due to
Trade, the marginal product of fixed resources used in
The expanding industry __________, and the marginal
Product of fixed resources used in the contracting
Industry __________.
A)rises; falls
B)remains the same; remains the same
C)changes by exactly the same percentage; changes by exactly the same percentage
D)falls; rises

Question

Quizplus · Accepted Answer

As resources are reallocated from the contracting industry to the expanding industry, the demand for resources in the expanding industry increases, leading to a rise in their marginal product. On the other hand, the reduced demand for resources in the contracting industry leads to a decrease in their marginal product. Therefore, the correct answer is option A, which states that the marginal product of fixed resources used in the expanding industry rises, while that of the contracting industry falls.

As Relative Prices in Various Industries Change Due to