Answer to Question #265686 in Microeconomics for kahar ismail

Question

Imagine that an aggressive neighboring country reduces the size of its military. As a result, both the Helang and the Merpati reduce their desired production of guns by the same amount. Which party would get the bigger “peace dividend”, measured by the increase in butter production? Explain.

Answer 1

The party with the lower opportunity costs in producing butter would get the bigger “peace dividend”, measured by the increase in butter production.