Given provisions of specific factors model of international trade we can affirm that land and capital are always immobile factors of production with labor being the mobile production factor. Is it true or false?

Question

BlackTom AI · Accepted Answer

The specific factors model assigns certain factors to specific sectors: land is tied to the agricultural sector, and capital is tied to the industrial sector. In this framework, these two factors are immobile between sectors, meaning they cannot (in the short run) move from one industry to another. Labor, on the other hand, is treated as mobile and can shift between sectors in response to wage or employment conditions.

Option analysis:
- True: This statement aligns with the core setup of the specific factors model, which posits land and capital as immobile across sectors while labor remains mobile. This immobility of land and capital is what creates gains from specialization and varying factor prices across industries when there are changes in demand or tariffs. 
- False: If one argues that land and capital are not always immobile, or that all factors are perfectly mobile across sectors, this would contradict the key assumption of the specific factors model. The model does not generally allow capital and land to freely relocate between sectors in the short run, though in some long-run or alternative models factors might adjust in different ways; the standard interpretation remains that they are specific and immobile across sectors.

Overall, within the conventional specific factors framework, the statement is correct because it captures the essential distinction: land and capital are immobile across sectors, while labor is mobile.

econ_420_120255_249094 Lesson 4 Quiz

Given provisions of specific factors model of international trade we can affirm that land and capital are always immobile factors of production with labor being the mobile production factor. Is it true or false?

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