Question from Past Microeconomics Qualifying ExamEdit
Fall 2004 - Section I, Question ten, George Mason University
T, F, U. State first whether the following statements are true, false or uncertain. Then briefly explain your reasoning in four or five sentences. You may use a graph if it helps clarify your answer.
Japan's agricultural land is more productive than agricultural land in the United States because its yield per acre is higher.
False. The yield per acre is higher because of the higher price of land. Land is more scarce in Japan relative to the US and the price of land therefore higher. For agriultural products to be competitive on the world market their production cost cannot exceed production cost in other places. The yield per acre in Japan therefore needs to be higher than the yield per acre in the US to make up for the higher fixed cost of the land.