Refer to the scenario above.Assume Industry Country relies more heavily on the use of capital and Farm Country relies more heavily on the use of labor in production.Holding labor constant,which country's output would be more negatively affected by a big storm that destroys large parts of the existing infrastructure?
A) Industry Country
B) Labor Country
C) Both countries equally
D) Both countries equally if their initial GDP is equal

Question

Quizplus · Accepted Answer

Industry Country relies more heavily on the use of capital in production, and a big storm that destroys large parts of the existing infrastructure would have a more negative impact on capital-intensive industries than on labor-intensive ones. Therefore, Industry Country's output would be more negatively affected than Farm Country's output.

Refer to the Scenario Above