Assume That Two Countries Both Have the Per-Worker Production Function

question 87

Multiple Choice

Assume that two countries both have the per-worker production function y = k^1/2, neither has population growth or technological progress, depreciation is 5 percent of capital in both countries, and country A saves 10 percent of output whereas country B saves 20 percent. If A starts out with a capital-labor ratio of 4 and B starts out with a capital-labor ratio of 2, in the long run:

• A) both A and B will have capital-labor ratios of 4.
• B) both A and B will have capital-labor ratios of 16.
• C) A's capital-labor ratio will be 4 whereas B's will be 16.
• D) A's capital-labor ratio will be 16 whereas B's will be 4.

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Definitions:

Price Increase

An adjustment made to the selling price of goods or services, often due to factors such as inflation, increased costs of production, or improvements in quality.

Percentage Change

A mathematical calculation that shows how much a quantity has increased or decreased as a proportion of its previous value.

Unit Sales

The quantity of items sold by a company, not taking into account the revenue from these sales.

Traceable Fixed Expense

A fixed expense that can be directly associated with a specific business segment or product.