Question 1

Suppose an economy uses only two inputs in production, capital and labour. The following table describes a production function, where y stands for output per worker and k is capital per worker.
a.Draw approximately this production function with y on the vertical axis.
b.Show that this production function exhibits diminishing returns to scale.
c.Suppose there are two countries, A and B. The economies of the two countries can be described by this production function. If Country A has initially a capital-labour ratio k = 0.167 and Country B has k = 0.412, show that an equal increase in capital produces more extra output in country A than in Country B.

Accepted Answer

a.Here is a graph of the given productio...

Question 2

Which of the following statements best explains the importance of real GDP per person?

Accepted Answer

A)  It shows the rate of economic growth.
B)  It measures a country's wealth.
C)  It provides a measure of the cost of living.
D)  It is a useful measure of well-being.E) A) and B)
F) A) and C)

Question 3

If the number of workers in an economy doubled, all other inputs stayed the same, and there were constant returns to scale, what would happen to productivity?

Accepted Answer

A)  It would fall to half its former value.
B)  It would fall but by less than half.
C)  It would stay the same.
D)  It would rise but less than double.E) B) and D)
F) A) and D)

Question 4

According to an economist, what kind of goods are national defence and knowledge?

Accepted Answer

A)  private goods
B)  public goods
C)  normal goods
D)  societal goodsE) B) and C)
F) A) and B)

Question 5

Suppose a country were to increase its saving rate. In the long run, which of the following would also increase?

Accepted Answer

A)  its level of income
B)  its growth rate of income
C)  its growth rate of productivity
D)  its growth rate in capital stockE) None of the above
F) A) and B)

Question 6

Investment in both human and physical capital has opportunity costs.

Accepted Answer

A) True 
 B)False

Question 7

Over the past century in Canada, by how much has real GDP per person grown?

Accepted Answer

A)  by about 1 percent per year
B)  by about 2 percent per year
C)  by about 4 percent per year
D)  by about 6 percent per yearE) A) and C)
F) A) and B)

Question 8

Which of the following best defines proprietary technology?

Accepted Answer

A)  It is knowledge that is known but no longer used much.
B)  It is knowledge that is known, but has only recently been discovered.
C)  It is knowledge that is known widely by those in a profession.
D)  It is knowledge that is known only by the company that discovers it.E) All of the above
F) A) and D)

Question 9

Which of the following is an example of the "brain drain"?

Accepted Answer

A)  A country's most highly educated workers immigrate to rich countries.
B)  A country has such a poor educational system that knowledge is lost over time.
C)  The population of a country grows so fast that the educational system can't keep up.
D)  A country steals patented technology from another country.E) A) and B)
F) B) and C)

Question 10

If a production function has constant returns to scale, how can output be doubled?

Accepted Answer

A)  by doubling labour
B)  by doubling any one of the inputs
C)  by doubling all of the inputs
D)  by increasing all inputs by more than doubleE) A) and B)
F) A) and D)

Question 11

Which of the following is a correct way to measure productivity?

Accepted Answer

A)  divide the number of hours worked by output
B)  divide output by the number of hours worked
C)  compute output growth
D)  divide the change in output by the change in number of hours workedE) A) and B)
F) A) and C)

Question 12

Which of the following best describes the relationship between productivity and standard of living?

Accepted Answer

A)  International trade makes a country's productivity irrelevant.
B)  A country's standard of living and its productivity are closely related.
C)  Productivity only increases revenue to investors, while general well-being is not affected.
D)  A rich country can enjoy high standard of living without the need for high productivity.E) A) and D)
F) A) and C)

Question 13

How large were the growth rates of Japan and Brazil over the past 100 years?

Accepted Answer

A)  1.5 percent
B)  1.75 percent
C)  2.0 percent
D)  2.25 percentE) B) and C)
F) None of the above

Question 14

Real GDP per person is $25 000 in Aquilonia, $10 000 in Nemedia, $15 000 in Shem, and $20 000 in Zexa. Saving per person is $2000 in all three countries. Other things equal, what would we expect?

Accepted Answer

A)  All four countries will grow at the same rate.
B)  Aquilonia will grow the fastest.
C)  Nemedia will grow the fastest.
D)  Shem will grow the fastest.E) A) and B)
F) B) and C)

Question 15

What do property rights refer to?

Accepted Answer

A)  a document stating the rights of ownership that accompany owning property
B)  the ability of people to exercise authority over the resources they own
C)  the right of the government to exercise authority over property owners
D)  the fact that some countries have greater natural resourcesE) A) and D)
F) A) and B)

Question 16

In the country of Krypton, the price of lead increased from $20 per kilogram to $22 per kilogram during a time when the overall price level increased by 8 percent. During this period, what happened to the real price of lead?

Accepted Answer

A)  It increased.
B)  It decreased.
C)  It stayed the same.
D)  It might have increased, decreased, or stayed the same; more information is needed to be sure.E) B) and D)
F) All of the above

Question 17

How does income per person in Canada compare with income per person in China and India?

Accepted Answer

A)  It is about 2 times that in China and 6 times that in India.
B)  It is about 4 times that in China and 8 times that in India.
C)  It is about 6 times that in China and 10 times that in India.
D)  It is about 10 times that in China and 6 times that in India.
E)  It is about 8 times that in China and 4 times that in India.F) A) and D)
G) D) and E)

Question 18

Which of the following would we expect to happen with prices or quantities of natural resources if they were becoming scarcer?

Accepted Answer

A)  We would expect prices to be rising relative to other prices, as they have been.
B)  We would expect prices to be rising relative to other prices, but this has not occurred.
C)  We would expect known quantities to be increasing, as they have been.
D)  We would expect known quantities to be falling, but they have not been.E) A) and D)
F) B) and C)

Question 19

The dictator of Turan has recently begun to arbitrarily seize farms belonging to his political opponents, and he has given the farms to his friends. His friends don't know much about farming. The courts in Turan have ruled that the seizures are illegal, but the dictator has ignored the rulings. Other things equal, what would we expect to happen to the growth rate in Turan?

Accepted Answer

A)  It will fall temporarily, but will return to where it was when the new owners learn how to farm.
B)  It will increase because the total amount of human capital in the country will increase as the new owners learn how to farm.
C)  It will fall and remain lower for a long time.
D)  It will not be affected unless widespread civil disorder or civil war results.E) B) and C)
F) All of the above

Question 20

Other things the same, if a country increased its saving rate, in 40 years which of the following would that country likely have?

Accepted Answer

A)  higher productivity and a higher growth rate of real GDP
B)  higher productivity but not a higher growth rate of real GDP
C)  the same productivity and growth of real GDP it began with
D)  higher productivity growth rate and higher real GDPE) A) and B)
F) A) and C)

Exam 7: Production and Growth

If the number of workers in an economy doubled, all other inputs stayed the same, and there were constant returns to scale, what would happen to productivity?

Correct Answer
verified

Which of the following best describes the relationship between productivity and standard of living?

Correct Answer
verified

Correct Answer
verified
a.Here is a graph of the given productio...
View Answer

Which of the following is a correct way to measure productivity?

Correct Answer
verified

How large were the growth rates of Japan and Brazil over the past 100 years?

Correct Answer
verified

Investment in both human and physical capital has opportunity costs.

Correct Answer
verified

If a production function has constant returns to scale, how can output be doubled?

Correct Answer
verified

How does income per person in Canada compare with income per person in China and India?

Correct Answer
verified

Over the past century in Canada, by how much has real GDP per person grown?

Correct Answer
verified

Which of the following best defines proprietary technology?

Correct Answer
verified

Suppose a country were to increase its saving rate. In the long run, which of the following would also increase?

Correct Answer
verified

In the country of Krypton, the price of lead increased from $20 per kilogram to $22 per kilogram during a time when the overall price level increased by 8 percent. During this period, what happened to the real price of lead?

Correct Answer
verified

According to an economist, what kind of goods are national defence and knowledge?

Correct Answer
verified

What do property rights refer to?

Correct Answer
verified

Which of the following is an example of the "brain drain"?

Correct Answer
verified

Which of the following would we expect to happen with prices or quantities of natural resources if they were becoming scarcer?

Correct Answer
verified

Which of the following statements best explains the importance of real GDP per person?

Correct Answer
verified

Real GDP per person is $25 000 in Aquilonia, $10 000 in Nemedia, $15 000 in Shem, and $20 000 in Zexa. Saving per person is $2000 in all three countries. Other things equal, what would we expect?

Correct Answer
verified

Other things the same, if a country increased its saving rate, in 40 years which of the following would that country likely have?

Correct Answer
verified

Correct Answer
verified

Exam 7: Production and Growth

If the number of workers in an economy doubled, all other inputs stayed the same, and there were constant returns to scale, what would happen to productivity?

Correct AnswerverifiedShow Answer

Which of the following best describes the relationship between productivity and standard of living?

Correct AnswerverifiedShow Answer

Correct Answerverifieda.Here is a graph of the given productio...View AnswerShow Answer

Which of the following is a correct way to measure productivity?

Correct AnswerverifiedShow Answer

How large were the growth rates of Japan and Brazil over the past 100 years?

Correct AnswerverifiedShow Answer

Investment in both human and physical capital has opportunity costs.

Correct AnswerverifiedShow Answer

If a production function has constant returns to scale, how can output be doubled?

Correct AnswerverifiedShow Answer

How does income per person in Canada compare with income per person in China and India?

Correct AnswerverifiedShow Answer

Over the past century in Canada, by how much has real GDP per person grown?

Correct AnswerverifiedShow Answer

Which of the following best defines proprietary technology?

Correct AnswerverifiedShow Answer

Suppose a country were to increase its saving rate. In the long run, which of the following would also increase?

Correct AnswerverifiedShow Answer

In the country of Krypton, the price of lead increased from $20 per kilogram to $22 per kilogram during a time when the overall price level increased by 8 percent. During this period, what happened to the real price of lead?

Correct AnswerverifiedShow Answer

According to an economist, what kind of goods are national defence and knowledge?

Correct AnswerverifiedShow Answer

What do property rights refer to?

Correct AnswerverifiedShow Answer

Which of the following is an example of the "brain drain"?

Correct AnswerverifiedShow Answer

Which of the following would we expect to happen with prices or quantities of natural resources if they were becoming scarcer?

Correct AnswerverifiedShow Answer

Which of the following statements best explains the importance of real GDP per person?

Correct AnswerverifiedShow Answer

Real GDP per person is $25 000 in Aquilonia, $10 000 in Nemedia, $15 000 in Shem, and $20 000 in Zexa. Saving per person is $2000 in all three countries. Other things equal, what would we expect?

Correct AnswerverifiedShow Answer

Other things the same, if a country increased its saving rate, in 40 years which of the following would that country likely have?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
a.Here is a graph of the given productio...
View Answer

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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