Scenario: Red Country and Purple Country have identical aggregate production functions. The amount of physical capital stock available to each country is equal. Labor supply in Red Country is HR, while the labor supply in Purple Country is HP.

-Refer to the scenario above.Relative to Purple Country's total efficiency units of labor,in Red Country,________.
A) the labor force must be bigger
B) technology must be better
C) the average human capital of workers must be smaller
D) marginal contributions of total efficiency units of labor must be smaller

Question

Scenario: Red Country and Purple Country have identical aggregate production functions. The amount of physical capital stock available to each country is equal. Labor supply in Red Country is HR, while the labor supply in Purple Country is HP.
 
-Refer to the scenario above.Relative to Purple Country's total efficiency units of labor,in Red Country,________.
A) the labor force must be bigger 
B) technology must be better 
C) the average human capital of workers must be smaller 
D) marginal contributions of total efficiency units of labor must be smaller

Quizplus · Accepted Answer

The marginal contributions of total efficiency units of labor must be smaller in Red Country because the same number of efficiency units of labor produces less output in Red Country than in Purple Country.

Scenario: Red Country and Purple Country Have Identical Aggregate Production