Question

Workland has a population of 10,000, of whom 7,000 work 8 hours a day to produce a total of 224,000 final goods. Laborland has a population of 5,000, of whom 3,000 work 7 hours a day to produce a total of 105,000 final goods:______
a. Workland has higher productivity and higher real GDP per person than Laborland.
b. Workland has higher productivity but lower real GDP per person than Laborland.
c. Workland has lower productivity but higher real GDP per person than Laborland.

Answer 1

Answer:

c. Workland has lower productivity but higher real GDP per person than Laborland.

Explanation:

a) Data and Calculations:

                              Workland        Laborland

Population                10,000            5,000

Working population  7,000             3,000

Labor force %            70%                 60%

Labor input             56,000 hrs    21,000 hrs

Workland output  224,000        105,000

Productivity = 224,000/56,000    105,000/21,000

=                               4                       5

Output per person  22.4                21

 = 224,000/10,000        and     105,000/5,000

b) The productivity of Workland and Laborland expressed as the ratio of output volume to the labor input shows that  for Workland, for every hour of labor input, there is 4 output, and for Laborland, for every hour of labor input, there is 5 output.  Laborland, therefore, has higher productivity than Workland.  However, Workland enjoys higher real GDP per person than Laborland because whereas, Workland produces output of 22.4 per person, Laborland only produces 21 per person.