In the specific-factors model, immigration causes __________ in the capital-labor ratio and __________ in the return to capital.
A) increases; decreases
B) increases; increases
C) decreases; decreases
D) decreases; increases

Question

Quizplus · Accepted Answer

In the specific-factors model, immigration increases the labor force, which decreases the capital-labor ratio because there is now more labor relative to capital. This increase in labor supply typically leads to a decrease in the wage rate and an increase in the return to capital, as capital becomes relatively scarcer compared to labor.

In the Specific-Factors Model, Immigration Causes __________ in the Capital-Labor