Question

In the Big Push model, six key assumptions are explained. Determine which of them is related to traditional sector and which one is for the modern sector:

1. Wage = 1 [ Select: "Modern sector", "None", "Both sectors", "Traditional sector"]

2. Price = 1 [ Select: "Modern sector", "Both sectors", "Traditional sector", "None"]

3. Increasing Returns to Scale [ Select: "Traditional sector", "Both sectors", "Modern sector", "None"]

4. There is a Fixed cost [ Select: "Modern sector", "Traditional sector", "None", "Both sectors"]

5. Production function and Wage are the same [ Select: "Modern sector", "Traditional sector", "Both sectors", "None"]

6. Labor is the only one factor of production [ Select: "Traditional sector", "Modern sector", "None", "Both sectors"]

7. Marginal Product of Labor > 1 [ Select: "Both sectors", "None", "Traditional sector", "Modern sector"]

Answer 1

The assumptions related to the traditional sector in the Big Push model are the fixed cost and the labor as the only factor of production.

Step-by-step explanation:

The first assumption, 'Wage = 1', is related to the modern sector. This assumption suggests that wages in the modern sector are fixed at a certain level.

The fourth assumption, 'There is a Fixed cost', is related to the traditional sector. This assumption implies that the traditional sector has a fixed cost of production.

The sixth assumption, 'Labor is the only one factor of production', is related to the traditional sector. This assumption states that labor is the only factor of production in the traditional sector.