In the specific factor model,the effect of an increase in the productivity of labor in the production of cloth will cause a(an)________ in the quantity of labor used to produce cloth,a(an)________ in the quantity of labor used to produce food and a(an)________ in the wage rate.
A) increase; decrease; increase
B) decrease; increase; increase
C) increase; decrease; decrease
D) decrease; increase; no change
E) increase; increase; no change

Question

Quizplus · Accepted Answer

In the specific factor model, an increase in productivity of labor in the production of a specific good will increase the demand for that specific factor (labor), leading to an increase in its wage rate. This means that the quantity of labor used to produce that specific good will increase, as it becomes relatively cheaper to produce. However, the demand for the other factor (capital) will decrease, leading to a decrease in its marginal product and a decrease in the quantity of that factor used in production. Therefore, an increase in productivity of labor in the production of cloth will cause an increase in the quantity of labor used to produce cloth, a decrease in the quantity of labor used to produce food, and an increase in the wage rate.

In the Specific Factor Model,the Effect of an Increase in the Productivity