Suppose a country has two specific factors, land and capital. Land is an input in the production
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Suppose a country has two specific factors, land and capital. Land is an input in the production of corn. Capital is used only in the production of rockets. A third factor, labor, is mobile between the two sectors. Holding all else constant, what is the effect of an increase in the amount of available capital in the short run:
a. On the real return on capital?
b. On the real return of the mobile factor of production?
c. On the output of corn and rockets?
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a The increase in capital leads to a decrease in its real return in the short run because th...View the full answer
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