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.How could research and development (R&D)lead to increases in productivity?

Question

Quizplus · Accepted Answer

Research and development can lead to the discovery and implementation of new technology, which can improve the production process and allow for the same output to be produced at a lower cost. This would increase productivity and efficiency in the production of good X in both Farm Country and Industry Country.

Scenario: Farm Country and Industry Country Are Two Neighboring Countries