Question

What about the specific-factors model guarantees that the specific factor that produces the import will be completely worse off?

a.The MPK is and MPT is decreasing in K and T, respectively

b.The MPK and the MPT are increasing in L

c.The specific factors cannot switch industries

d.Inputs are paid their productive value

part 2 Which of Specific-Factors model assumptions is likely making labor seem relatively better off in the model than in the real world?

a.Labor is paid their productive ability

b.There are two inputs in each industry and one is fixed

c.Labor can move costlessly between industries

d.There are two goods produced

Answer 1

1) lnputs are paid their productive value

( Imports will definitely lead to a decline in the productive value of the factor which is used in its production in the domestic market. As a result factor's income declines and leads to its worse off . )

2) Labour can move costlessly between industries.

( In the specific factors model, land and capital are treated as Specific factors. Labour is treated as a mobile factor.so it can move between Industries. Use of more labour is a possible. The factors are also paid as per their productive value.so labour is supposed to be slightly better off than other factors.)