HW 4 QUESTIONS

The influences of institutions on economic performance can be easily contrasted using:

North and South Korea.

If the production function is Y=K^1/3L^2/3, , then in per worker terms, it can be written as y = K^1/3/L.

false

If you have data on per capita GDP and capital per worker, to find total factor productivity you can use the equation Abar = y/k^1/3, if capital's share of GDP is two-thirds.

false

If MPK > r, the firm:

should hire more capital until MPK = r.

Which of the following explain(s) differences in total factor productivity?

technology, Natural resources, human capital and institutions

As an economist working at the International Monetary Fund, you are given the following data for Japan: observed per capita GDP, relative to the United States, is 0.760; predicted per capita GDP, given by y=k^1/3, is 1.06. What is total factor productivity?

0.72

In the Cobb-Douglas production function Y=AK^1/3L^2/3 defining y = Y/L as output per person and k = K/L as capital per person, the per person production function is:

Y=Abar(k)^1/3

In the equation Y = F(K,L) = AK^1/3L^2/3, the lack of a "bar" over the L means that it is:

an endogenous variable.

A production function exhibits decreasing returns to scale when you:

double each input—you less than double the output.

A production function exhibits increasing returns to scale when you:

double each input—you more than double the output.

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

constant returns to scale.

Consider two countries, A and B. If each country produces using identical production functions, but yA > yB and kA = kB, the total factor productivity of country A equals that of B.

false

If the marginal product of capital equals the rental rate of capital, firms should not buy any more capital.

true

In the Cobb-Douglas production function Y=K^1/3L^2/3, labor's share of GDP is:

two-thirds, regardless of how much labor there is.

Both the United States and France, among the richest countries in the world, have similar levels of education and capital per worker, but U.S. citizens enjoy higher incomes than the French. One explanation might be differences in:

institutions

Consider two economies. If each country has the same production function and the same amount of capital and labor, the country that ________ produces more.

is more productive

As an economist working at the International Monetary Fund, you are given the following data for Burundi: observed per capita GDP, relative to the United States, is 0.01; predicted per capita GDP, given by y=k^1/3, is 0.18. What is total factor productivity?

0.06

In the year 2014 the five richest countries had a per capita GDP ________ times higher than the five poorest countries. Differences in capital per worker explain about ________ percent of this difference, with total factor productivity making up about ________ percent of this difference.

70; 5; 14

Which of the following explain(s) differences in total factor productivity?

Infrastructure, Human capital, institutions and legal structure

The equation Y = F(K,L) = AK^1/3L^2/3 is an example of

a production function.

Which of the following do(es) NOT explain differences in total factor productivity?

the labor stock

If K=K bar and L=L bar, then output is determined by:

the total amount of capital and labor available in an economy