Question

Suppose Country A produces two goods, Good X and Good Y. Production of Good X involves an intensive use of skilled workers. Good Y is a relatively capital-intensive good. If the country experiences a wave of immigration of skilled workers, capital remaining unchanged, the Rybczynski theorem predicts that:

Answer 1

Answer:

The production of good Y will reduce.

Explanation:

The Rybczynski Theorem (RT) says that if the endowment of some resource increases, the industry that uses that resource most intensively will increase its output while the opposite indus­try will decrease its output.

In view of this question, the production of commodity or goods X requires intensive use of skilled workers. Hence, the production of goods X will increase as a result of immigration of skilled workers in the country while that of goods Y will reduce.

The theorem also suggests that unbalanced growth in factor supplies tends, at con­stant commodity prices, to steer to strong asymmetric changes in output level of two sorts of industries-capital-intensive and labour-intensive.

If the member of things and commodities are evenly matched and two commodities (such as X and Y) aren't jointly produced, this asymmetry entails that growth in one factor, like labour, acts as a force to cause an actual fall within the production of the other commodity.