Canada produces airplanes, which require labour and capital to produce, and beef, which requires labour and land to produce. Canada exports planes. If the world price of plane increases thenGroup of answer choicesCapital to labour ratio in plane industry will increaseCapital to labour ratio in plane industry will not changeCanada will completely specialize in plane productionCapital to labour ratio in plane industry will decrease
Question
Canada produces airplanes, which require labour and capital to produce, and beef, which requires labour and land to produce. Canada exports planes. If the world price of plane increases thenGroup of answer choicesCapital to labour ratio in plane industry will increaseCapital to labour ratio in plane industry will not changeCanada will completely specialize in plane productionCapital to labour ratio in plane industry will decrease
Solution
The correct answer is "Capital to labour ratio in plane industry will increase". Here's why:
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If the world price of planes increases, it means that the demand for planes has increased. This would incentivize Canada to produce more planes to take advantage of the higher prices.
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To produce more planes, Canada would need to increase the amount of labour and capital used in the plane industry.
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However, the amount of labour available may not increase as quickly as the amount of capital, because capital (in the form of machinery, equipment, etc.) can often be acquired more quickly than labour (which involves hiring and training new workers).
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Therefore, the capital to labour ratio in the plane industry will increase, as more capital is used relative to labour to meet the increased demand for planes.
The other options are not necessarily true based on the information given. The capital to labour ratio in the plane industry will not remain the same or decrease, because the increased demand for planes will likely lead to an increase in the use of capital relative to labour. Canada may not completely specialize in plane production, because it still has other industries (like beef production) that also contribute to its economy.
Similar Questions
Canada produces airplanes, which require labor and capital to produce, and beef, which requires labor and land to produce. Canada exports planes. If the productivity of Canadian capital increases while the productivity of Canadian land decreases, Group of answer choicesworkers are better offoutput of beef industry decreasesthe labour to capital ratio in the plane industry decreasesworkers are worse off
Brazil produces aeroplanes, which require labor and capital to produce, and beef, which requires labor and land to produce. Brazil exports beef. If the world price of beef decreases then Group of answer choices Brazil will completely specialize in beef production Land to labor ratio in beef industry will increase Capital to labor ratio in aeroplanes industry will not change Capital to labor ratio in aeroplanes industry will increase
As the quantity produced increasesthe cost of per unit production decreases.Select one:a.Product Differentiationb.Capital Requirementsc.Government Regulationsd.Economies of Scale
When production is characterized by opportunity costs, the resulting production possibilities frontier will be a straight line.
The production possibility frontier shows the maximum output a nation can produce with available resources.Group of answer choicesTrueFalse
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