Business, 14.04.2020 23:11 brooklynpage5283
There are two factors of production (capital and land), two goods (cars and wheat), and two countries (Krugland and Helpland). Both factors are used in the production of each good, but car production is relatively capital intensive and wheat production is relatively land intensive. Krugland is relatively capital abundant and Helpland is relatively land abundant.
Assume Krugland is a small country. Suppose the capital stock of Krugland miraculously doubles but its land endowment doesn’t change.
a. Will Krugland’s output of cars increase or decrease? Briefly explain.
b. Will Krugland’s output of wheat increase or decrease? Briefly explain.
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