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 H R , while the labor supply in Purple Country is H P .

-Refer to the scenario above. Population growth is relatively slower in Purple Country than in Red Country, but increased teacher salaries have helped increase high school and college graduation rates. Over time, how will output and total efficiency units of labor likely change in Purple Country?
A) Output will increase faster and total efficiency units will increase slower than in Red Country.
B) Output may or may not increase faster and total efficiency units will increase faster than in Red Country.
C) Output will increase slower and total efficiency units may or may not increase faster than in Red Country.
D) Output may or may not increase faster and total efficiency units may or may not increase faster than in Red Country.

Question

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 H R , while the labor supply in Purple Country is H P .
 
-Refer to the scenario above. Population growth is relatively slower in Purple Country than in Red Country, but increased teacher salaries have helped increase high school and college graduation rates. Over time, how will output and total efficiency units of labor likely change in Purple Country?
A) Output will increase faster and total efficiency units will increase slower than in Red Country. 
B) Output may or may not increase faster and total efficiency units will increase faster than in Red Country. 
C) Output will increase slower and total efficiency units may or may not increase faster than in Red Country. 
D) Output may or may not increase faster and total efficiency units may or may not increase faster than in Red Country.

Quizplus · Accepted Answer

The Answer of 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 H R , while the labor supply in Purple Country is H P .
 
-Refer to the scenario above. Population growth is relatively slower in Purple Country than in Red Country, but increased teacher salaries have helped increase high school and college graduation rates. Over time, how will output and total efficiency units of labor likely change in Purple Country?
A) Output will increase faster and total efficiency units will increase slower than in Red Country. 
B) Output may or may not increase faster and total efficiency units will increase faster than in Red Country. 
C) Output will increase slower and total efficiency units may or may not increase faster than in Red Country. 
D) Output may or may not increase faster and total efficiency units may or may not increase faster than in Red Country.

Red Country and Purple Country Have Identical Aggregate Production Functions