Scenario: Two economies, A and B, have identical aggregate production functions with diminishing returns. In both economies, capital and labor are equally important for production. Economy A has twice as many efficiency units of labor as economy B. Economy B has twice as much physical capital stock as economy A.
-Refer to the scenario above.From the description,it can be inferred that ________.
A) economy B employs more sophisticated technology in production
B) economy A better educates its citizens
C) economy B has more valuable natural resources
D) both statements B and C are true

Question

Quizplus · Accepted Answer

Both statements B and C are true. Economy A has twice as many efficiency units of labor as economy B, which suggests that economy A better educates its citizens. Economy B has twice as much physical capital stock as economy A, which suggests that economy B has more valuable natural resources.

Scenario: Two Economies, a and B, Have Identical Aggregate Production