Question: Diminishing returns to specialization occur when?

What are two reasons for assuming diminishing returns to specialization?

What are two reasons for assuming diminishing returns to specialization? -Different goods use resources in different proportions. -Production might draw on marginal resources whose productivity is less than resources initially used. According to Heckscher and Ohlin, each country has certain factor endowments.

Why do diminishing rather than constant returns to specialization sometimes occur?

Which of the following is a reason for diminishing rather than constant returns to specialization? Different goods use different resources in different proportions. Each nation may specialize in producing a narrower range of products, importing goods that it does not make.

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Which of the following suggests that trade is a positive sum game in which all participating countries fetch economic gains?

In other words, to an even greater degree than the theory of absolute advantage, the theory of comparative advantage suggests that trade is a positivesum game in which all countries that participate realize economic gains.

Which concept negates the idea that a country can specialize to the degree suggested by the Ricardian model?

The simple comparative advantage model assumed that trade does not change a country’s stock of resources or the efficiency with which it utilizes those resources. Diminishing returns show that it is feasible for a country to specialize to the degree suggested by the simple Ricardian model.

What are the causes of diminishing returns to a factor?

The causes for the operation of law of diminishing returns are discussed below:

  • Fixed Factors of Production: The law of diminishing returns applies because certain factors of production are kept fixed.
  • Scarce Factors: ADVERTISEMENTS:
  • Lack of Perfect Substitutes:
  • Optimum Production:

Why do diminishing returns occur?

History of The Law of Diminishing Returns

Neoclassical economists postulate that each “unit” of labor is exactly the same, and diminishing returns are caused by a disruption of the entire production process as extra units of labor are added to a set amount of capital.

Which theory is said to predict trade patterns more accurately?

The Middle East has an abundance of oil reserves; therefore, exporting oil supports the ______ theory which is based on creating an advantage based on factor endowments. Which theory is said to predict trade patterns more accurately? Leontief paradox.

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When a rich country enters into a free trade agreement with a poor country?

Terms in this set (15)

The Samuelson Critique suggests that when a rich country enters into a free trade agreement with a poor country, the lower prices that the richer country’s citizens pay may not be enough to produce a net gain for that economy if the agreement ends up lowering wages in the richer country.

How does trade affect economic growth?

In general, trade has a positive and significant impact on economic growth, which is consistent with the evidence in the empirical literature. A one percent rise in the average trade to GDP ratio leads to an increase in the average GDP per capita growth by about one-half (0.47) percentage point.

When a country is more efficient than any other country at producing a product the country has a N?

The idea of comparative advantage is attributed to English political economist David Ricardo and his book On the Principles of Political Economy and Taxation. When a country has a comparative advantage in producing certain items, it means the nation can make the products at a lower cost than other countries.

Which theory does not support unrestricted free trade between countries?

The Heckscher Ohlin factors proportion theory does not support the case for unrestricted free trade it states that a country can export only

Which of the following suggests that trade is a positive sum game?

According to Ricardo’s theory of comparative advantage, countries shall not produce a good even if they have an absolute advantage in its production. The theory of comparative advantage suggests that trade is a positivesum game in which all countries that participate realize economic gains.

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What is the likely result for the gains from specialization according to the concept of diminishing returns?

Different goods use resources in different proportions. Not all resources are of the same quality. What is the likely result for the gains from specialization according to the concept of diminishing returns? Gains are likely to be exhausted before specialization is complete.

What are four main instruments of trade policy?

Geoff Jehle examines the primary instruments of national trade policy, often termed commercial policy, including quantitative restrictions (e.g., quotas), tariffs, non-tariff barriers, and export taxes.

Which theory states that in order to be successful a country should have more exports than imports?

A classical, country-based international trade theory that states that a country’s wealth is determined by its holdings of gold and silver. When the value of exports is greater than the value of imports.

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