Two countries,Rhodia and Rubium,have identical production functions in the form Y = A × K⁰.²⁵ × H⁰.⁷⁵,where Y denotes total output,A denotes the level of technology,K denotes the physical capital stock,and H denotes the efficiency units of production.Both countries have the same amount of physical capital stock and use the same technology.However,the total efficiency units of labor in Rhodia is higher than that in Rubium.Which of the following is likely to be true in this case?
A) The GDP of Rhodia is higher than that of Rubium.
B) The GDP of Rubium is higher than that of Rhodia.
C) The Human Development Index of Rhodia is lower than that of Rubium.
D) The poverty rate in Rhodia is likely to be higher than that in Rubium.

Question

Quizplus · Accepted Answer

With the same amount of physical capital and technology, the only difference between the two countries is the efficiency units of labor. Higher efficiency units of labor mean that Rhodia can produce more output using the same amount of labor as Rubium. Therefore, Rhodia's GDP is likely to be higher than that of Rubium.

Two Countries,Rhodia and Rubium,have Identical Production Functions in the Form