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.They imply that the ________.
A) average human capital of workers is greater in Purple Country
B) relationship between physical capital, labor, and GDP is the same in both countries
C) value of natural resources is the same in both countries
D) people in both countries experience the same quality of education

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.They imply that the ________.
A) average human capital of workers is greater in Purple Country 
B) relationship between physical capital, labor, and GDP is the same in both countries 
C) value of natural resources is the same in both countries 
D) people in both countries experience the same quality of education

Quizplus · Accepted Answer

The scenario states that Red Country and Purple Country have identical aggregate production functions and equal amount of physical capital stock. Therefore, the relationship between physical capital, labor, and GDP is the same in both countries. The scenario does not provide any information about average human capital, natural resources, or quality of education.

Scenario: Red Country and Purple Country Have Identical Aggregate Production