Suppose There Are Two Countries, Here and There, Which Have

question 190

Multiple Choice

Suppose there are two countries, Here and There, which have identical amounts of resources, identical technologies, and identical populations. Both produce two types of goods-consumer goods and capital goods-and they both always operate on their production possibilities frontiers. The only difference is that this year There chooses to produce relatively more capital goods than Here. What will happen as a result?

• A) Here will have a lower living standard this year and will grow slower than There.
• B) Here will have a lower living standard this year but will grow faster than There.
• C) There will have a lower living standard this year and will grow slower than Here.
• D) There will have a lower living standard this year but will grow faster than Here.

---

Definitions:

Contractual Duties

Obligations that parties must follow as outlined in a contract, enforceable by law.

Expected Utility

Expected utility theory represents how rational individuals with preferences choose among risky alternatives to maximize their satisfaction or utility.

Toll Road

A public or private roadway for which a fee is assessed for passage, commonly used to fund road maintenance or construction projects.

Fine

A monetary penalty imposed by a government or legal authority as punishment for breaking a law or regulation.