EC-202 Test 1 SG (7)

26. In addition to investment in physical and human capital, what other public policies might a country adopt to increase productivity?

In addition to investment in physical and human capital, a country might increase productivity by (a) specifying and enforcing property rights, (b) encouraging free trade, (c) controlling population growth -- although the case has been made that a larger population creates more ideas and so more technology, and (d) promoting research and development.

25. Compare and contrast the population theories of Malthus

The difference is that Malthus predicted that population growth would be greater than growth in the ability to increase output. He believed that people would continue to populate the earth until output reached a subsistence level. On the other hand Kremer argues that population growth increased productivity allowing people to improve their standard of living despite growing population. Kremer argues that with more population comes more innovations. The improvements in technology outweighed any adverse impact of the increase in population on the standard of living.

19. Inward-oriented policies a. include imposing tariffs and other trade restrictions. b. have generally increased productivity and growth in the countries that pursued them. c. promote the production of goods and services that the country produces most efficiently. d. All of the above are correct.

a

21. In medieval Europe an important technological advance was the use of the padded horse collar for plowing. Once this idea was thought of, other people used it. This illustrates that knowledge is generally a a. public good. b. societal good. c. private good. d. normal good.

a

24. Increases in both human capital per worker and physical capital per worker increase productivity. a. True b. False

a

4. The one variable that stands out as the most significant explanation of large variations in living standards around the world is a. productivity. b. population. c. preferences. d. prices.

a

Table 25-1. Athens and Troy both produce only ribs and baked potatoes. Quantities: Ribs A: 200,000 T: 300,000 Baked Potatoes A: 400,000 T: 250,000 Base year prices Ribs A: $10 T: $10 Baked Potatoes A: $4 T: $4 Population and Employment Pop: A: 6,000 T: 8,000 Total hours of employment A: 40,000 T: 60,000 9. Refer to Table 25-1. Which of the following is correct? a. Both productivity and the standard of living are higher in Athens than Troy. b. Productivity is higher in Athens while the standard of living is higher in Troy c. Productivity is higher in Troy while the standard of living is higher in Athens. d. Both productivity and the standard of living are higher in Troy than Athens.

a

11. 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? 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 smudging

b

12. Suppose a country imposes new restrictions on how many hours people can work. If these restrictions reduce the total number of hours worked in the economy, but all other factors that determine output are held fixed, then a. productivity and output both rise. b. productivity rises and output falls. c. productivity falls and output rises. d. productivity and output fall.

b

13. If your firm's production function has constant returns to scale, then if you double all your inputs, your firm's output will a. double and productivity will rise. b. double but productivity will not change. c. more than double and productivity will rise. d. more then double but productivity will not change.

b

14. A certain production process requires only two types of inputs — capital and labor. In 2006, 100 units of labor and 50 units of capital were employed, and 100 units of output were produced. In 2013, 112 units of labor and 56 units of capital were employed. If the production process displays constant returns to scale, then how many units of output were produced in 2013? a. 100 b. 112 c. 124 d. 144

b

20. A country with a relatively low level of real GDP per person is considering adopting two policies to promote economic growth. The first is to decrease barriers to trade. The second is to restrict foreign portfolio investment. Which of these policies do most economists say promote growth? a. both the first and the second b. the first but not the second c. the second but not the first d. neither the first nor the second

b

23. If per capita real income grows by 2 percent per year, then it will double in approximately 20 years. a. True b. False

b

3. In 2010, the imaginary nation of Bovina had a population of 5,000 and real GDP of 600,000. In 2011 it had a population of 5,200 and real GDP of 636,480. During 2011 real GDP per person in Bovina grew by a. 2 percent, which is high compared to average U.S. growth over the last one-hundred years. b. 2 percent, which is about the same as average U.S. growth over the last one-hundred years. c. 4 percent, which is high compared to average U.S. growth over the last one-hundred years. d. 4 percent, which is about the same as average U.S. growth over the last one-hundred years.

b

6. Over the last ten years productivity grew more slowly in Iberia than in Aire while the population and total hours worked remained the same in both countries. It follows that a. real GDP per person must be lower in Iberia than in Aire. b. real GDP per person grew more slowly in Iberia than in Aire. c. the standard of living must be higher in Iberia than in Aire. d. All of the above are correct.

b

10. Which of the following is an example of human capital? a. textbooks b. hand held power tools c. knowing how to repair cars d. All of the above are correct.

c

15. Refer to Figure 25-1. The curve becomes flatter as the amount of capital per worker increases because of a. increasing returns to capital. b. increasing returns to labor. c. diminishing returns to capital. d. diminishing returns to labor.

c

16. Refer to Figure 25-1. The shape of the curve is consistent with which of the following statements about the economy to which the curve applies? a. In the long run, a higher saving rate leads to a higher growth rate of productivity. b. In the long run, a higher saving rate leads to a higher growth rate of income. c. Returns to capital become increasingly smaller as the amount of capital per worker increases. d. All of the above are correct.

c

2. Mexico is 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.

c

22. Senator Noitall says that in order to help poor countries develop, the United States should: 1. Encourage poor countries to allow U.S. and other foreign firms to build and operate businesses in their country; 2. Reduce or eliminate subsidizes to U.S. producers when poor countries have a comparative advantage producing those goods the U.S. subsidizes; 3. Work to promote political stability in poor countries; and 4. Reduce poor countries reliance on market forces in their economies. How many of these ideas are likely to help poor countries grow? a. 1 b. 2 c. 3 d. 4

c

5. Productivity is defined as the quantity of a. labor required to produce a nation's GDP. b. labor required to produce one unit of goods and services. c. goods and services produced from each unit of labor input. d. goods and services produced per unit of time.

c

Table 25-1. Athens and Troy both produce only ribs and baked potatoes. Quantities: Ribs A: 200,000 T: 300,000 Baked Potatoes A: 400,000 T: 250,000 Base year prices Ribs A: $10 T: $10 Baked Potatoes A: $4 T: $4 Population and Employment Pop: A: 6,000 T: 8,000 Total hours of employment A: 40,000 T: 60,000 8. Refer to Table 25-1. Which of the following is correct? a. Both real GDP and real GDP per person are higher in Athens than Troy. b. Real GDP is higher in Athens while real GDP per person is higher in Troy c. Real GDP is higher in Troy while real GDP per person is higher in Athens. d. Both real GDP and real GDP per person are higher in Troy than Athens.

c

1. Which of the following measures how the level of well-being in a country has changed over time? a. level of nominal GDP per person. b. growth rate of nominal GDP. c. growth rate of real GDP. d. growth rate of real GDP per person.

d

17. Which of the following statements is correct? a. In an economy-wide sense, property rights are an important prerequisite for the price system to work. b. Property rights give people the ability to exercise authority over the resources they own. c. Based on the available evidence, the existence of well-established and well-enforced property rights appears to be associated with an enhanced standard of living. d. All of the above are correct.

d

18. If a newly elected government takes actions that makes its country's courts more efficient and less corrupt, then a. producers will have greater confidence that they will benefit from their efforts. b. producers are likely to be more specialized. c. buyers and sellers will be more likely to honor contracts. d. All of the above are correct.

d

7. Popeye produces 20 cans of spinach in 8 hours. Wimpy produces 15 hamburgers in 10 hours. If each hamburger trades for 1.5 cans of spinach, then a. Popeye's production and productivity are greater than Wimpy's. b. Popeye's production is greater than Wimpy's, but his productivity is less. c. Wimpy's production and productivity are greater than Popeye's. d. Wimpy's production is greater than Popeye's, but his productivity is less.

d