ECONOMICS Homework questions
Anthony owns a landscaping business that has 4 employees. His company is able to earn revenue of $600 per day. He knows that if he hires another worker, he would have to pay that worker $50 per day and the company would earn revenue of $680 per day if the new worker is hired. Determine the value of the marginal product of labor of the employee that Anthony is considering hiring.
$80
Consider a $100 increase in GDP per capita. In 2012, Niger had a GDP per capita of approximately $800, and the United States had a GDP per capita of $50,700. Calculate the corresponding growth rates for these two countries Niger's growth rate is ____ percent, and the U.S. growth rate is ____ percent. (Round your responses to two decimal places.)
(900-800)/800=12.50% by contrast, a $100 increase in the U.S. GDP per capita (from $50,700 to $50,800)reflects a gdp growth rate to only .20 percent
According to the aggregate production function, GDP increases when a nation ____________. (Check all that apply.)
- improves its technology - increases the human capita of its workers - increases its stock of physical capita
Which of the following statements are true regarding political institutions within extractive economic institutions? (Check all that apply.)
-Political power is concentrated in the hands of the political elite. -Political institutions put little constraint on how political power can be used.
Why was there no sustained economic growth before modern times, that is, before 1800? (Check all that apply.)
-The place of technological change was much slower than in modern times - increases in aggregate income were offset by increases in population, keeping per capita income low
Which of the following functions do inclusive economic institutions provide? (Check all that apply.)
-They set up a judicial system that enforces contracts and upholds the law -They allow private parties to sign contracts for economic or financial transactions.
An economic enterprise that defines and upholds property rights incentivizes citizens to work and save. This example of ____ an institutional a cultural cause of prosperity more efficiently utilizes factors of production in order to move from a ____ capital-intensive labor-intensive society to a ____ labor-intensive capital-intensive society
1. an institutional 2. labor- intensive 3. capital-intensive
Dream Home Builders optimizes by employing a total of ____workers
13
Structural unemployment can be caused by ____________. -collective bargaining rights of workers - minimum wage laws - time- consuming job search efforts.
A and B only
Assume country A is a developing country with considerable income inequality. It has ample natural resources and participates in international trade by exporting these resources to the rest of the world. Which of the following could lead to a reduction in poverty in country A?
Advancements in artificial intelligence that increases productivity in the western world. An increase in government spending on infrastructure creates an excess demand for lowdashskilled jobs in the economy, increases the wages for lowdashskilled workers, increases output, and in turn increases GDP per capita.
The Earned Income Tax Credit (EITC) provides low-income workers with a refundable tax credit (reducing the tax obligations of the worker). The recipient must have a job, and the amount of the credit depends on marital status, income, and number of children. Which of the following outcomes is likely to be true if there is an expansion of the EITC policy rather than an increase in the minimum wage?
An expansion of the EITC policy will lead to a decrease in involuntary unemployment, while an increase in the minimum wage will result in an increase in involuntary unemployment.
Over the past 200 years, the U.S. economy has shown____
An increase in income per capita, albeit not an entirely steady one.
Which of the following would cause the labor demand curve to shift to the right?
An increase in the demand for a product
Initial phases of the growth process are often accompanied by increasing income inequality within a country. Using concepts developed in the chapter, explain why this might be the case.
Creative destruction creates economic winners and losers.
Which of the following statements is true? A. The income of all citizens always increases with a growth in income per capita of the economy. B. Countries with lower income inequality have lower poverty as well. C. The income of all workers always increases with a growth in income per capita of the economy. Your answer is not correct. D. Income per capita doesn't inform us about the distribution of income in the economy.
D. Income per capita doesn't inform us about the distribution of income in the economy.
Suppose the local pizza restaurant wants to hire another delivery driver to replace the worker who recently quit. The former worker could make 40 deliveries per week. The restaurant has received three applications from equally qualified workers. If it hires any one of these workers, it could boost deliveries by 30 deliveries per week. If each of these applicants is capable of boosting deliveries by 30 per week, what would happen to deliveries if the restaurant hired all three of the applicants?
Deliveries would increase by less than 90 per week, since there will be diminishing marginal product of labor.
A country with a very low per capita GDP can have a very high growth rate because mathematically, when the _______ is ______ , even a small difference in the _____ will result in a large growth rate.
Denominator, lower, numerator
Which of the following statements about foreign aid is true?
Foreign aid does not have an impact on technology.
In 1968, Paul Ehrlich, a Stanford University professor, claimed that overpopulation would lead to famines and starvation in the 1970s and 1980s. In his book The Population Bomb, he said that unless population growth was curbed, millions around the world would die. However, as we now know, this did not happen. What do you think was the flaw in Ehrlich's argument?
He did not account for the role that technology can play in increasing the food supply.
Which of the following is likely to be a disadvantage of the EITC?
It could reduce the labor participation rate of low-income individuals as they will try to meet the eligibility criteria.
Amidst discussions on budget cuts to rein in the U.S. fiscal deficit, some commentators were of the opinion that foreign aid spending should be reduced. Others felt that reducing foreign aid would adversely affect the recipient countries. How effective has foreign aid been in reducing poverty?
Not very effective, because the aid has not been directed at activities that increase sustained growth.
Example of catch-up growth is____
South Korea, which by 1970 had become poorer relative to the united states, but over the last 40 years grew faster than the united states, closing the gap that had opened up previously
The geography hypothesis states ____________.
The geography hypothesis claims geography, climate, and ecology are fundamental causes of prosperity. answer; geography is responsible for differences in prosperity
Economic growth is____
The increase in income (GDP) per capita of an economy.
Which of the following is not true regarding the natural rate of unemployment?
The natural rate of unemployment is 0 percent when the U.S. economy is not in a recession.
In April 2012, the Bazanian Daily, a leading newspaper in the country of Bazania, carried a report titled "20,000 jobs added in the last quarter; unemployment rate shoots up from 5 percent to 6.7 percent." How could the unemployment rate in Bazania increase even when new jobs were created?
The new jobs may have made discouraged workers optimistic enough to start applying for jobs, thus re-entering the labor force and being counted as unemployed, which causes the overall unemployment rate to increase.
Which of the following are examples of creative destruction? (Check all that apply.)
The use of fax machines has declined drastically with the availability of Internetdashbased alternatives. The rise of companies like Uber is having an adverse effect on yellow cabs in New York.
After the Second World War, Germany was divided into two parts, East Germany and West Germany. East Germany was controlled by the former Soviet Union while West Germany was controlled by the other Allied governments: the United States, the United Kingdom, and France. The war had destroyed most of Germany's economy. The Soviet Union as well as the Allied occupation forces sought to rebuild the economies of their respective parts. Before the fall of the Berlin Wall reunited East and West Germany in 1990, West Germany's economy grew at an annual average growth rate of 4.4 percent, which was about 3 times higher than East Germany's rate. Draw the parallel between the natural experiment discussed in the chapter and the case of East and West Germany. Based on the information given in the question and your own research, why do you think two otherwise similar areas had such divergent growth rates? East and West Germany likely had different growth rates because ____________.
West's Germany's economic institutions were marketed orientated
In the presence of low income inequality in an economy, growth in income per capita leads to_____ in poverty.
a fall
Population density, like the fraction of the population urbanized (the fraction of the population living in urban centers with 5,000 or more inhabitants), can be used as a measure of economic development for areas 500 years ago (say, in 1500). Suppose the graph on the right illustrates the relationship between population density in 1500 and GDP per capita in 1500 and between population density in 1500 and GDP in 2005. Based on this information, you can conclude there is ____________.
a positive relationship between population density in 1500 and prosperity has become negative.
which of the following can generate sustained growth?
advancing the technological knowledge used in production
What other reasons might explain why unemployment is lower among workers with a relatively higher level of education? -More educated workers have a higher opportunity cost of time. -Workers with a higher level of education are in greater demand by firms. -More educated workers have more human capital
all of the above
Which of the following is an example of what economists refer to as job search? -An individual that engages in the job hunt by determining who is hiring and how much they pay.. -A person who applies for a high-paying job but does not qualify, so she begins searching for an appropriate position. -People that engage in the job hunt by sending out resumes
all of the above
All of the following were characteristics of eighteenth-century Britain that supported the Industrial Revolution except ____________.
a newly-designed market system.
The Industrial Revolution affected economic growth ____________.
because technological changes, such as new machinery and new methods of production, became more systematic and pervasive, underpinning economic growth.
In a closed economy without government spending, all income must be ____________.
consumed or saved; therefore, GDPvis equal to the sum of aggregate consumption and investment
The curve depicting the value of the marginal product of labor is also the labor ____curve.
demand
This results in a labor demand curve that is
downward-sloping
The existence of extractive institutions discourages entrepreneurship in an economy by ____________.
failing to ensure property rights
A minimum wage is considered a wage ___ . If placed above the equilibrium wage for an industry, it can cause ____ . Voluntary unemployment would occur ____ the wage floor
floor; structural unemployment; above
What type of unemployment does job search lead to?
frictional unemployment
When Dream Home Builders employs 11 workers, it can increase profits by_____ workers
hiring more
Which of the following is an example of a proximate cause of prosperity?
human capital
We know that Alex is ____________, and we know that John is ____________
in the labor force; in the labor force
If the market wage changes to $27, Dream Home Builders would ____ the number of workers employed to __workers
increase;14
The source of sustained growth is technological progress, which continuously ______ the amount that an economy can produce, thereby _____ the cost over time
increases; decreases
To say that private property rights are well-enforced in an economy means that ____________.
individuals can securely hold assets.
Using the concepts discussed above, which of the following statements is true of inequality?
inequality is likely to increase in an economy if the jobs lost due to technological improvement are low-skilled jobs
Physical capital accumulation is driven by ____________.
investment
Households play a role in physical capital accumulation because ____________.
it is households that determine their level of consumption and therefore the rate of saving.
In his book The Elusive Quest for Growth, development economist William Easterly discusses the relationship between foreign aid and investment in poor countries. He posits that to establish the effectiveness of aid in promoting investment, two tests should be passed: First, there should be a positive statistical association between aid and investment; second, aid should pass into investment 1 for 1, that is, a 1 percent (of GDP) increase in aid should result in a 1 percent (of GDP) increase in investment. Using a data set of 88 countries from 1965 to 1995, he finds that only 17 of 88 countries pass the first test, and of them, only 6 pass the second. Based on the information in the chapter, and perhaps your own reading, explain why foreign aid designed to spur investment usually does not work.
it is insufficient to sustain growth
In the context of this chapter, what is meant by an institution?
laws/ regulations
If a significant tax reduction was offered to families that homeschool their children, we would most likely see a ____________.
leftward shift in the labor supply curve.
Suppose that a 10 percent increase in the physical capital stock increases GDP by 10 percent. Now consider an additional 10 percent increase in the physical capital stock This increase in the physical capital stock will increase GDP by
less than 10 percent
The value of the marginal product of labor is the ____________.
market value of a worker's additional output for a firm.
Thus, ____ started out with a lower base and had a ___ growth rate.
niger, a higher
We know that Alex is ____________, and we know that John is ____________.
not in the labor force; not in the labor force (unpaid work)
The fact that unemployment is lower among workers with a relatively higher level of education can be explained in part by the ____
principle of optimization
What is Catch-up growth is the____
process by which relatively poorer nations increase their incomes by taking advantage of the knowledge and technologies already invented in other technologically advanced nations.
sustained growth is____
process where GDP per capita grows at a positive and relatively steady rate for long periods of time
Private property rights foster economic development by ____________.
providing incentives to invest
Using the concepts discussed in the chapter, which of the following reasons would explain an increase in productivity and GDP at a given level of employment?
technological improvement
Using the concepts discussed in the chapter, which of the following is a reason that an economy experiences economic growth with a simultaneous increase in unemployment?
technological improvement, resulting in capital substituting for labor
The geography hypothesis claims that large differences in prosperity across the world are determined by all of the following except ____________.
technology
Consider the following scenario: U.S. GDP per capita 50 years ago was $15 comma 000, and Mexican GDP per capita 50 years ago was $7 comma 500. The average GDP per capita growth rate of the United States is 2 percent per year, while the average GDP per capita growth rate of Mexico is 1 percent per year. Which of the following statements is true after 50 years?
the U.S. GDP per capita is more than triple that of mexico.
An example of sustained growth is____
the United States, which demonstrated sustained growth between 1820 and 2007
Which of the following could not be a contributing cause of the Industrial Revolution in 19 Superscript th century Britain?
the government allowed large monopolies to flourish
A profit-maximizing firm will continue to hire workers until ___________.
the revenue from the marginal worker equals the wage rate.
Which of the following is one of the three important elements that define institutions?
they are determined by individuals
According to the aggregate production function, which inputs drive production? (Check all that apply.)
total efficiency units of labor, physical capital, level of technology
According to the geography hypothesis, incomes in poor countries are ____________.
unlikely to be changed, because climate is largely out of their control.
Firms should hire workers until the ____________.
value of the marginal product of labor is at least as great as the wage paid.
The labor demand curve shows the quantity of labor demanded will decrease as
wages increases
Those who are voluntarily unemployed are ____________.
willing to work, but not at the prevailing wage.
Which of the following is not an example of someone who is frictionally unemployed?
Carl, who is currently taking classes full time in order to qualify for a management position.
Which of the following would not be an example of someone in the labor force?
Mark, 45, a self-made millionaire, who volunteers full-time between several local charities
Does an increase in GDP per capita of a nation imply that all its citizens have become richer?
No, because the average income per capita of a nation is not the same as the income of each individual in that nation.
Does hiring additional workers increase the total revenue at a decreasing rate? Identify the reason why this may or may not be true.
Yes, because the marginal product of labor diminishes as the quantity of labor increases.
