ECON 200 Chapter 24-25

Which of the following are true for the production function with regard to marginal product?

When the marginal product equals zero, the production function is flat. Even with diminishing marginal product, total output can still be increasing. The slope of the production function decreases when diminishing marginal product sets in.

What is the definition of an institution?

a significant practice, relationship, or organization

What is the correct definition of technology?

the knowledge available for use in production

Identify all instances of technological advancement.

the automated telephone switch the assembly line

Identify the items that contribute to an increase in a nation's real per capita GDP.

Improvements in technology make workers more productive. The average education level rises.

Select all the events that could result in a nation's increasing the slope of its entire production function.

Scientific discoveries revolutionize industry.

How does the Solow model explain technological change?

Technological change is random and occurs exogenously.

Investment can be positive when net investment is zero.

True

In poor nations, access to [blank] is lower than in wealthy nations. Moreover, it is typically lower for [blank] than for [blank].

education; women; men;

The aggregate production function describes the relationship among a nation's physical capital, [blank] capital, and [blank] resources and its [blank], quantified as gross domestic product.

human; natural; total output;

The United States produces six times as much corn per acre as it did 85 years ago. This has been accomplished by means of new [blank]varieties of corn, improved products for [blank] control, more efficient [blank] techniques, and new [blank].

hybrid; disease; irrigation; fertilizers;

In the last two decades, China's [blank] has grown at just under [blank] annually. China will soon rank among the world's [blank]nations.

real per capita GDP; 10%; wealthiest;

What, by consensus among economists, are the broad factors for economic growth?

resources; technology; institutions;

Consider input X as one factor leading to output Y. What is the marginal product of X?

the change in Y divided by the change in X.

Identify the correct equations for approximating economic growth.

%Δ real per capita GDP = %Δ real GDP - %Δ population %Δ real GDP = %Δ nominal GDP - %Δ prices

Drag items to fill in the correct growth rate in world GDP for each era in the table.

0.02%; 0.64%; 1.04%; 2.12%;

If a country's nominal GDP is growing at 4.4% annually, annual inflation is running at 2.3%, and the population growth rate is 0.5%, what is the growth rate of real per capita GDP?

1.6%

Match the 2008 real per capita GDPs to their corresponding countries on the world map.

India: $4,559 South Korea: $30,061 South Africa: $7,346

Suppose that in 2018, Brazil's annual economic growth rate has dropped to 1.4%. Use the rule of 70 to estimate how long it would take for its real per capita GDP to double.

50 years

Assuming the blue production function (F1) is the initial state of a country's economy, click on the production function after a surge in the nation's technology sector, for instance, due to government funding.

F2

If data links connecting different parts of the United States were to fail, GDP would fall. If, on the other hand, the network of state-of-the-art, high-speed connections were doubled in size, what would happen?

GDP would increase. The marginal product would be smaller than that of the original network. The marginal product would be positive.

Place the countries in order of economic growth, least to greatest, for the period 1950-2010.

Haiti; El Salvador; Mexico; Turkey;

Match each 2000 real per capita GDP (in 2010 US dollars) with the corresponding country or region.

India ($2,900) China ($5,243) Western Europe ($30,642) Latin America ($9,026) United States ($43,629) Africa ($2,254)

What key assumption of the early Solow model can be seen in this graph depicting the historical relationship between capital investment and real GDP growth?

Investment in capital is the key to economic growth.

Apply the correct label to each level of capital investment on the aggregate production function to illustrate one of the important implications of the Solow model.

K1: highest marginal product; K2: first sign of diminishing returns K3: economy approaching steady state

Apply the appropriate label to each country.

Liberia (poor); South Korea (rich); Tanzania (poor); Taiwan (rich); Niger (poor); Israel (rich);

Identify the country to which each description applies.

Private property rights have been secure since about 1950. (Taiwan) Private property rights are not secure; land ownership records are unreliable. (Liberia) Today's private property rights date back to a radical 1978 experiment. (China)

At one time, diplomats in New York could not be punished in any way for parking violations. Two sociologists studied violation patterns and concluded that diplomats from some nations got tickets far more often than diplomats from other nations. Which nations' diplomats frequently committed parking violations? Which nations' diplomats committed very few?

Sudan Egypt Bulgaria

Place in order the events in the evolution of the Solow growth model.

The Solow growth model was developed in 1956. The Solow model was applied to many African nation that had just gained independence. Growth policies failed; nations that had received international aid were no better off. Real-world observations caused economists to revisit the Solow growth model.

When technological advances occur in an economy, the production function is changed because capital becomes more productive.

True

Identify each item as either human capital or technology.

an assembly line control system (technology) a worker who has been trained to service an electron microscope (human capital) a method of extracting drinkable water from the ocean (technology) a factory team that together builds smartphones (human capital)

Identify each form of capital as natural, physical, or human.

national highway system (physical capital) tourist-friendly coastal waters (natural resources) workers skilled at various handicrafts (human capital)

Although institutions are often associated with a physical representative (like the Supreme Court building), the essence of an institution is a set of expectations and [blank] that shape the [blank]in which [blank].

practices; environment; decisions are made;

The standardized [blank] made it much easier to transport goods around the world, by eliminating the need to [blank] them every time the mode of [blank] changed. This illustrates the key role of [blank] as a factor of production.

shipping container; repack; transportation; physical capital;

Which developments were characteristic of the Industrial Revolution and the events leading up to it, in nations where it took hold?

technological innovations a sharp upturn in real per capita GDP a shift from agriculture to manufacturing legal innovations, such as increased protection for private property

Match the terms with the correct definitions.

the equalizing of per capita GDP across nations, over time (convergence) the construction or purchase of new physical capital (capital investment) the loss in value, over time, of machinery, buildings, and infrastructure (depreciation) the condition in which a nation's capital stock is not growing (steady state)

$53,000 is placed in an investment account that grows at a fixed rate of 2% (compound growth) per year. How much is in the account after four years? Round your answer to the nearest whole number.

$57,369

In this economy, ladders are used to acquire bushels of fruit hanging from trees. The graph shows the relationship between ladders, a factor of production, and output measured in bushels of fruit. Match the size of the marginal product to the corresponding section on the graph.

0-1: maximum; 1-3: moderate; 3-4: zero;

What is the approximate difference in life expectancy for people born in rich nations versus people born in poor ones?

15-20 years

Worldwide, incomes began to rise dramatically around [blank]. Even so, a historian has estimated that in 1820, the average annual income in 2010 dollars was about [blank]. That was sufficient income for [blank] but not enough for what most people today consider [blank].

1800; $1,100; basic necessities; ordinary comforts;

The average American's real income today is about four times what it was in [blank]. Average lifetime lengths have increased by [blank], the number of hours worked per week has decreased by [blank], and homes have [blank] doubled in size.

1960; 12%; 17%; more than;

The U.S. dairy cow industry produced milk from just over [blank]million cows in 1924. Today, it relies on just under[blank] million. And yet total milk production today is a little over [blank] what it was in 1924. This is possible because the typical cow produces [blank] as much milk, thanks to strategic breeding and changes in how [blank].

20; 10; twice; five times; cows' stalls are constructed;

Use the rule of 70 to find the approximate time required for a population to grow from 1 million people to 2 million if it is growing at a compound rate of 2.6% annually.

27 years

Seth is trying to decide how many workers is the optimal amount at his factory, which produces artisan-crafted grooming products. He observes the following: When there is one worker, 10 hairbrushes are produced daily. When there are two workers, 16 hairbrushes are produced daily. When there are three workers, 20 hairbrushes are produced daily. What is the marginal product of the third worker?

4 hairbrushes per day

In economics, cultural norms are a given—not a factor that can be critiqued and changed for economic reasons.

False

Natural resources are the decisive ingredient in any country's prospects for economic growth.

False

What are some of the main elements of the original Solow growth model?

Over time, per capita GDP will equalize across nations. An increase in the capital stock will result in growth. Investment in poorer nations should yield relatively higher returns. Growth will stop when nations reach their steady state.

Based on the graph, which of the following statements are true?

The production function F2 can be represented in equation form by Y = A × F(natural resources, human capital, physical capital). For any nonzero level of capital inputs (K), the output from F2 is more than the output for F1.

Robert Solow believed that over time, growth in developing nations would increase and growth in developed nations would slow down.

True

There are parts of the world where the price of drinkable water is roughly comparable to that of gasoline in the United States.

True

Apply the appropriate label to each market situation.

Two countries agree to lower import tariffs on selected goods. (international trade) A country loosens its restrictions on foreign-based land ownership. (flow of funds across national borders) A nation permits private firms to compete with the state-owned mail service. (competitive markets)

In the [blank] production function, the slope of the function corresponds to the [blank]. If the slope is [blank], we know that output is increasing. As the slope declines, that is a sign of [blank]marginal product.

aggregate; marginal product; positive; diminishing;

We can use the total output to determine what is happening with the marginal product, or we can use the marginal product to analyze total output. Drag each word or phrase to the appropriate blank space in order to correctly complete the table.

growing; not changing;

Diminishing marginal product sets in after the [blank] ladder.

first

Which institutions foster economic growth?

efficient taxes private property rights political stability stable inflation rate open markets

The original Solow growth model assumed that technology growth is [blank], which means that innovation is [blank] the economy.

exogenous; independent of;

Identify the characteristics that have enabled Singapore to become one of the world's most prosperous nations.

stable financial system strategic location high literacy rate

Place the inventions in chronological order.

telephone; X-ray machina; antilock brakes; xerography (photocopying); cell phone

In the map below, dark areas represent concentrations of [blank]. Not coincidentally, these tend to be located along natural [blank] created by [blank], which provide ready access to [blank].

wealth; shipping lanes; coasts and rivers; the flow of trade;