Scenario: 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 HR, while the labor supply in Purple Country is HP. If efficiency units of labor increase by one in each country, how will it change output in Red Country relative to Purple Country? A. Output will increase more in Red Country. B. Output will increase less in Red Country. C. Output will decrease more in Red Country. D. Output will decrease less in Red Country.
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Scenario: Red Country and Purple Country have identical aggregate production functions. The amount o...
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