Figure 11-14

Figure 11-14 shows the optimal input combinations for the production of a given quantity of cotton in the United States and in China.
-Refer to Figure 11-14.Which of the following could explain why the United States and China use different input combinations to produce a given quantity of cotton and yet, each country produces that quantity at the lowest possible cost?
A)because the prices of inputs are not the same for the two countries: labor is relatively lower-priced and capital is relatively higher priced in the United States
B)because the prices of inputs are not the same for the two countries: labor is relatively lower-priced and capital is relatively higher priced in China
C)because the United States has more sophisticated technology and therefore is more efficient in cotton production
D)because the marginal product per dollar spent on capital yields a higher return in the United States than in China

Question

Figure 11-14
  
Figure 11-14 shows the optimal input combinations for the production of a given quantity of cotton in the United States and in China.
-Refer to Figure 11-14.Which of the following could explain why the United States and China use different input combinations to produce a given quantity of cotton and yet, each country produces that quantity at the lowest possible cost?
A)because the prices of inputs are not the same for the two countries: labor is relatively lower-priced and capital is relatively higher priced in the United States 
B)because the prices of inputs are not the same for the two countries: labor is relatively lower-priced and capital is relatively higher priced in China 
C)because the United States has more sophisticated technology and therefore is more efficient in cotton production 
D)because the marginal product per dollar spent on capital yields a higher return in the United States than in China

Quizplus · Accepted Answer

The figure shows that the optimal input combinations for the production of cotton in the US and China are different, which suggests that the prices of inputs are not the same in the two countries. If labor is relatively cheaper in China and capital is relatively cheaper in the US, then it makes sense for each country to use different input combinations to produce the same quantity of cotton at the lowest possible cost. Therefore, option B is the correct answer. Option A is incorrect because it states that labor is relatively lower-priced in the US, which is contradicted by the figure. Option C is incorrect because the figure does not provide any information about the technology used by the two countries. Option D may be true, but it does not provide a complete explanation for why the two countries use different input combinations.

Figure 11-14 Figure 11-14 Shows the Optimal Input Combinations for the Production