Question 1

Consider the production function Y = 4F(L,K,H,N). Suppose F(10,8,6,5)= 100 and F(30,24,18,15)=300. Does the production function have the property of constant returns to scale? Why or why not?

Accepted Answer

Yes, the production function has the pro...

Question 2

Some economists argue that it is possible to raise the standard of living by reducing population growth. As an economist interested in incentives rather than coercion, what kind of policy would you recommend to slow population growth?

Accepted Answer

Since bearing a child has an opportunity...

Question 3

A professor at a university finds a way to reduce the costs of producing automobile glass. The method is very easy for anyone to copy. A company develops a substance which prevents eyeglasses from smudging. It receives a patent on the formula. Which of these are common technological knowledge?

Accepted Answer

A)   the method to reduce costs of producing automobile glass, and the formula for the substance that prevents smudging
B)   the method to reduce costs of producing automobile glass, but not the formula for the substance that prevents smudging
C)   the formula for the substance that prevents smudging, but not the method to reduce costs of producing automobile glass
D)   neither the method to reduce costs of producing automobile glass nor the formula for the substance that prevents smudgingE) B) and C)
F) A) and D)

Question 4

Consider three imaginary countries. In Aziria, saving amounts to $3,000 and consumption amounts to $7,000; in Graniva, saving amounts to $2,000 and consumption amounts to $8,000; and in Tanistan, saving amounts to $4,500 and consumption amounts to $10,500. The saving rate is

Accepted Answer

A)   higher in Aziria than in Tanistan, and it is higher in Tanistan than in Graniva.
B)   higher in Graniva than in Tanistan, and it is higher in Tanistan than in Aziria.
C)   higher in Tanistan than in Graniva, and it is the same in Graniva and Aziria.
D)   higher in Aziria than in Graniva, and it is the same in Aziria and Tanistan.E) All of the above
F) None of the above

Question 5

Mexico is

Accepted Answer

A)   a poor country, and over the past century its rate of economic growth has been higher than that of the United States.
B)   a poor country, and over the past century its rate of economic growth has been lower than that of the United States.
C)   a middle-income country, and over the past century its rate of economic growth has been higher than that of the United States.
D)   a middle-income country, and over the past century its rate of economic growth has been lower than that of the United States.E) A) and C)
F) B) and C)

Question 6

In some countries in Sub-Saharan Africa real GDP per person has been stagnant for many years.

Accepted Answer

A) True 
 B)False

Question 7

Last year real GDP in the imaginary nation of Oceania was 561.0 billion and the population was 2.2 million. The year before, real GDP was 500.0 billion and the population was 2.0 million. What was the growth rate of real GDP per person during the year?

Accepted Answer

A)   12 percent
B)   10 percent
C)   4 percent
D)   2 percentE) B) and C)
F) All of the above

Question 8

If a production function has constant returns to scale, then if all inputs double so does production.

Accepted Answer

A) True 
 B)False

Question 9

An increase in capital increases productivity only if it is purchased and operated by domestic residents.

Accepted Answer

A) True 
 B)False

Question 10

The traditional view of the production process is that capital is subject to

Accepted Answer

A)   diminishing returns, so that other things the same, real GDP in poor countries should grow at a faster rate than in rich countries.
B)   diminishing returns, so that other things the same, real GDP in poor countries should grow at a slower rate than in rich countries.
C)   increasing returns, so that other things the same, real GDP in poor countries should grow at a faster rate than in rich countries.
D)   increasing returns, so that other things the same, real GDP in poor countries should grow at a slower rate than in rich countries.E) None of the above
F) C) and D)

Question 11

In the U.S., each additional year of schooling has historically raised a person's wage on average by about

Accepted Answer

A)   5 percent. In less developed countries the gap between the wages of educated and uneducated workers is smaller.
B)   10 percent. In less developed countries the gap between the wages of educated and uneducated workers is smaller.
C)   5 percent. In less developed countries the gap between the wages of educated and uneducated workers is larger.
D)   10 percent. In less developed countries the gap between the wages of educated and uneducated workers is larger.E) B) and C)
F) A) and D)

Question 12

Figure 25-1 
-Refer to Figure 21-1. In order for the figure to make sense, do we have to assume that capital is the only determinant of output? Briefly explain.

Accepted Answer

No, we do not have to assume that capita...

Question 13

An increase in the saving rate permanently increases the growth rate of real GDP per person.

Accepted Answer

A) True 
 B)False

Question 14

Japan's status as a rich nation is attributable to

Accepted Answer

A)   Japan's quantities of natural resources, but not to international trade.
B)   international trade, but not to Japan's domestic quantities of natural resources.
C)   the fact that Japanese productivity has remained nearly constant for more than 100 years.
D)   the fact that the Japanese have downplayed the role of human capital in economic growth.E) C) and D)
F) A) and B)

Question 15

The United Kingdom is

Accepted Answer

A)   an advanced economy, and over the past century its rate of economic growth has been higher than that of the United States.
B)   an advanced economy, and over the past century its rate of economic growth has been lower than that of the United States.
C)   a middle-income country, and over the past century its rate of economic growth has been higher than that of the United States.
D)   a middle-income country, and over the past century its rate of economic growth has been lower than that of the United States.E) A) and B)
F) A) and C)

Question 16

Which of the following is considered human capital? Knowledge acquired from

Accepted Answer

A)   early childhood education programs
B)   job training
C)   on-the-job experience
D)   All of the above are correct.E) A) and B)
F) None of the above

Question 17

All else equal, if there are diminishing returns, then which of the following is true if a country increases its capital by one unit?

Accepted Answer

A)   Output will rise by more than it did when the previous unit was added.
B)   Output will rise but by less than it did when the previous unit was added.
C)   Output will fall by more than it did when the previous unit was added.
D)   Output will fall but by less then it did when the previous unit was added.E) B) and D)
F) A) and B)

Question 18

Which of the following are human capital and physical capital, respectively?

Accepted Answer

A)   for an accounting firm: the accountants' knowledge of tax laws and computer software
B)   for a grocery store: grocery carts and shelving
C)   for a school: chalkboard and desks
D)   for a library: the building and the reference librarians' knowledge of the InternetE) B) and C)
F) A) and C)

Question 19

The opening of a new American-owned factory in Algeria would tend to increase Algeria's GDP more than it increases Algeria's GNP because

Accepted Answer

A)   some of the income from the factory accrues to people who do not live in Algeria.
B)   gross domestic product is income earned within a country by both residents and nonresidents, whereas gross national product is the income earned by residents of a country while producing both at home and abroad.
C)   all of the income from the factory is included in Algeria's GDP.
D)   All of the above are correct.E) None of the above
F) A) and D)

Question 20

The average income in a rich country, such as the United States or Japan, is more than

Accepted Answer

A)   3 times, but less than 5 times, the average income in a poor country, such as Indonesia or Nigeria.
B)   5 times, but less than 10 times, the average income in a poor country, such as Indonesia or Nigeria.
C)   10 times, but less than 20 times, the average income in a poor country, such as Indonesia or Nigeria.
D)   more than 20 times the average income in a poor country, such as Indonesia or Nigeria.E) A) and B)
F) A) and C)

Exam 25: Production and Growth

Consider three imaginary countries. In Aziria, saving amounts to $3,000 and consumption amounts to $7,000; in Graniva, saving amounts to $2,000 and consumption amounts to $8,000; and in Tanistan, saving amounts to $4,500 and consumption amounts to $10,500. The saving rate is

Correct AnswerverifiedShow Answer

The traditional view of the production process is that capital is subject to

Correct AnswerverifiedShow Answer

The opening of a new American-owned factory in Algeria would tend to increase Algeria's GDP more than it increases Algeria's GNP because

Correct AnswerverifiedShow Answer

Which of the following is considered human capital? Knowledge acquired from

Correct AnswerverifiedShow Answer

A professor at a university finds a way to reduce the costs of producing automobile glass. The method is very easy for anyone to copy. A company develops a substance which prevents eyeglasses from smudging. It receives a patent on the formula. Which of these are common technological knowledge?

Correct AnswerverifiedShow Answer

Which of the following are human capital and physical capital, respectively?

Correct AnswerverifiedShow Answer

The average income in a rich country, such as the United States or Japan, is more than

Correct AnswerverifiedShow Answer

If a production function has constant returns to scale, then if all inputs double so does production.

Correct AnswerverifiedShow Answer

Consider the production function Y = 4F(L,K,H,N). Suppose F(10,8,6,5)= 100 and F(30,24,18,15)=300. Does the production function have the property of constant returns to scale? Why or why not?

Correct AnswerverifiedYes, the production function has the pro...View AnswerShow Answer

All else equal, if there are diminishing returns, then which of the following is true if a country increases its capital by one unit?

Correct AnswerverifiedShow Answer

Last year real GDP in the imaginary nation of Oceania was 561.0 billion and the population was 2.2 million. The year before, real GDP was 500.0 billion and the population was 2.0 million. What was the growth rate of real GDP per person during the year?

Correct AnswerverifiedShow Answer

In the U.S., each additional year of schooling has historically raised a person's wage on average by about

Correct AnswerverifiedShow Answer

The United Kingdom is

Correct AnswerverifiedShow Answer

In some countries in Sub-Saharan Africa real GDP per person has been stagnant for many years.

Correct AnswerverifiedShow Answer

Mexico is

Correct AnswerverifiedShow Answer

Figure 25-1 -Refer to Figure 21-1. In order for the figure to make sense, do we have to assume that capital is the only determinant of output? Briefly explain.

Correct AnswerverifiedNo, we do not have to assume that capita...View AnswerShow Answer

Some economists argue that it is possible to raise the standard of living by reducing population growth. As an economist interested in incentives rather than coercion, what kind of policy would you recommend to slow population growth?

Correct AnswerverifiedSince bearing a child has an opportunity...View AnswerShow Answer

An increase in the saving rate permanently increases the growth rate of real GDP per person.

Correct AnswerverifiedShow Answer

An increase in capital increases productivity only if it is purchased and operated by domestic residents.

Correct AnswerverifiedShow Answer

Japan's status as a rich nation is attributable to

Correct AnswerverifiedShow Answer

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Yes, the production function has the pro...
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No, we do not have to assume that capita...
View Answer

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Since bearing a child has an opportunity...
View Answer

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