Chapter 3 Gains and Lossed from Trade in the Specific-Factors Model.pptxVIP

3Gains and Losses from Trade in the Specific-Factors Model1Specific-FactorsModel2Earnings of Labor3Earnings of Capitaland Land1 Specific-Factors ModelThe Home CountryHome and ForeignManufacturing uses labor and capitalAgriculture uses labor and landIn each industry, increases in the amount of labor used are subject to diminishing returns: the marginal product of labor declines as the amount of labor used in the industry increases1 Specific-Factors ModelThe Home CountryFIGURE 3-1Panel (a) Manufacturing Output As more labor is used, manufacturing input increases, but it does so at a diminishin