Econ Ch.4

Which of the following is included in TFP?

The quality of labor

In a Cobb-Douglas production function, the factor share of income going to each input is equal to the exponent on the input in the production function.

True

If the productivity parameter is assumed to equal 1, the production model

correctly identifies that countries are richer if they have more capital, incorrectly predicts that poor countries are substantially richer than they are, and incorrectly predicts that some countries are richer than the United States

A production function exhibits increasing returns to scale when you

Double each input-you more than double the output

Which of the following is/are not essential for economic success?

Low taxes

A model is a(n)___representation of ___world that we use to study economic phenomena.

Mathematical; real

Suppose India has a per capita GDP that is 0.074 times the US GDP. it has a capital-per-person ratio that is 0.035 times that of the US. Compared to the US value of TFP

0.23

Differences in capital per person explain about___of the difference in incomes between the richest and poorest countries, while differences in ____ explain about ___?

1/3; TFP; 2/3

Output per person is higher when

A country has a higher capital-to-population ratio, is more efficient in adopting a technology, and has stronger property rights and contract enforcement

The two main inputs we consider in a simple production function are:

Capital and labor.

One of the key characteristics of the Cobb-Douglas production function is

Constant returns to scale

If the marginal product of capital is less than the rental rate of capital, the firm should rent more capital.

False

The solution to the firm's maximization problem is:

How much capital and labor to hire given the rental rate of capital and labor's wage rate

The marginal product of labor is defined as:

The additional output generated bu hiring an additional unit of labor

In the production model from the text, which of the following is not an exogenous variable or parameter?

The amount of capital

The law of diminishing marginal product to capital means that as we add additional units of capital

but hold labor constant, output will increase, but at a decreasing rate

For the efficient allocation of resources,_____ and ____ must be equal across firms

the marginal product of capital; the marginal product of labor