Scenario: Two Countries, X and Y, have identical production functions. Country X's GDP is about 8,000,000 and Country Y's GDP is about 3,000,000. Additionally, technology factors are AX = 3 and AY = 10 for country X and Y, respectively. There are 125 workers in Country A and 200 workers in Country B.
-Refer to the scenario above.Computing a hypothetical GDP per capita for Country Y allows us to ________.
A) compare output in the two countries if workers were equally educated
B) compare output in the two countries if they had equal access to physical resources
C) compare output in the two countries if they had access to equal technology
D) all statements are correct

Question

Quizplus · Accepted Answer

Computing a hypothetical GDP per capita for Country Y allows us to compare output in the two countries if they had access to equal technology. Since the production functions are identical, the only difference in GDP is due to the difference in technology (AX = 3 and AY = 10). Computing GDP per capita would hold constant the number of workers and would provide an accurate comparison of the two countries based solely on technology.

Scenario: Two Countries, X and Y, Have Identical Production Functions