Scenario: Farm Country and Industry Country are two neighboring countries. Both countries produce only one good: good X. Production in both countries is a function of total efficiency units of labor and physical capital stock.
-Refer to the scenario above.Why would an increase in competition in Farm Country increase productivity?
A) Unemployment would decrease.
B) Resources would be allocated and utilized more efficiently.
C) Firms would earn lower profits.
D) The physical capital stock employed in production would increase.

Question

Quizplus · Accepted Answer

An increase in competition in Farm Country would force firms to become more efficient and utilize their resources better, leading to an increase in productivity. This would result in better allocation of resources and a more effective use of labor and physical capital, ultimately leading to higher productivity.

Scenario: Farm Country and Industry Country Are Two Neighboring Countries