Econ 202 (Exam 02) Problem set 2

Which of the following statements is correct? a. The level of real GDP is a good gauge of economic prosperity, and the growth of real GDP is a good gauge of economic progress. b. The level of real GDP is a good gauge of economic progress, and the growth of real GDP is a good gauge of economic prosperity. c. The level of real GDP is a good gauge of economic prosperity, and the level of real GDP per person is a good gauge of economic progress. d. The level of real GDP is a good gauge of economic progress, and the level of real GDP per person is a good gauge of economic prosperity.

a. The level of real GDP is a good gauge of economic prosperity, and the growth of real GDP is a good gauge of economic progress.

Industrial machinery is an example of a. a factor of production that in the past was an output from the production process. b. technological knowledge. c. a production function. d. an item which always has the property called constant returns to scale.

a. a factor of production that in the past was an output from the production process.

Which of the following provide benefits to society at large and not just to the person(s) who pursues it? a. both technological knowledge that is a public good and education b. technological knowledge that is a public good, but not education c. education, but not technological knowledge that is a public good d. neither education, nor technological knowledge that is a public good

a. both technological knowledge that is a public good and education

In 2007, Modern Electronics, Inc. produced 60,000 calculators, employing 80 workers, each of whom worked 8 hours per day. In 2008, the same firm produced 76,500 calculators, employing 85 workers, each of whom worked 10 hours per day. Between 2007 and 2008, productivity at Modern Electronics: 2007: 60,000 calculators / 80 workers *8 hours worked = 93.75 2008: 76,500 calculators / 85 workers *10 hours worked = 90.00 (90-93.75/93.75) *100 = -4% a. decreased by 4.00 percent. b. remained constant. c. increased by 8.33 percent. d. increased by 27.50 percent

a. decreased by 4.00 percent.

Other things the same, a country that increases its savings rate will have a. higher future capital and higher future real GDP per person. b. higher future capital but not higher future real GDP per person. c. higher future real GDP per person but not higher future capital. d. neither higher future capital nor higher future real GDP per person.

a. higher future capital and higher future real GDP per person.

In a market economy, we know that a resource has become scarcer when a. its price rises relative to other prices. b. it is non-renewable and some of it is used. c. people search for substitutes. d. All of the above are correct.

a. its price rises relative to other prices.

What term do economists use to describe the relationship between the quantity of inputs used and the quantity of output produced? a. production function b. input function c. capital function d. returns to scale

a. production function

The catch-up effect can help explain a. the spectacular economic growth experienced by South Korea over the years 1960 to 1990. b. the spectacular economic growth experienced by the United States over the years 1960 to 1990. c. why the diminishing-returns property is no longer taken seriously by economists. d. why the World Bank is more inclined to encourage the flow of capital to advanced economies rather than to developing economies.

a. the spectacular economic growth experienced by South Korea over the years 1960 to 1990.

Which of the following is a part of your economics professor's human capital? a. the things she learned at some prestigious university b. her copy of Mankiw's text c. her chalk holder d. All of the above are correct.

a. the things she learned at some prestigious university

Technological knowledge refers to a. human capital. b. available information on how to produce things. c. resources expended transmitting society's understanding to the labor force. d. All of the above are technological knowledge.

b. available information on how to produce things.

An increase in the saving rate would, other things the same, a. increase growth more for a poor country than for a rich country, and raise growth permanently. b. increase growth more for a poor country than for a rich country, but raise growth temporarily. c. increase growth more for a rich country than for a poor country, and raise growth permanently. d. increase growth more for a rich country than for a poor country, but raise growth temporarily

b. increase growth more for a poor country than for a rich country, but raise growth temporarily.

17. Suppose there are constant returns to scale. Now suppose that over time a country doubles its workers, its natural resources, its physical capital, and its human capital, but its technology is unchanged. Which of the following would double? 2*Y/ 2*L = AF(2*(K/L), 2*(H/L), 2*(N/L)) a. both output and productivity b. output, but not productivity c. productivity, but not output d. neither productivity nor output

b. output, but not productivity

A nation's standard of living is best measured by its a. real GDP. b. real GDP per person. c. nominal GDP. d. nominal GDP per person.

b. real GDP per person.

One of the Ten Principles of Economics in Chapter 1 is that people face tradeoffs. The growth that arises from capital accumulation is not a free lunch. It requires that society a. conserve resources for future generations. b. sacrifice consumption goods and services now in order to enjoy more consumption in the future. c. recycle resources so that future generations can produce goods and services with the accumulated capital. d. None of the above is correct.

b. sacrifice consumption goods and services now in order to enjoy more consumption in the future.

Which of the following is a determinant of productivity? a. human capital per worker b. physical capital per worker c. natural resources per worker d. All of the above are correct.

d. All of the above are correct.

The return to schooling for society is higher than the return to schooling for the individual if a. the concept of diminishing returns applies to education. b. the concept of constant returns to scale applies to education. c. human capital conveys positive externalities. d. investment in human capital involves no opportunity costs.

c. human capital conveys positive externalities.

In the long run, a higher saving rate a. cannot increase the capital stock. b. means that people must consume less in the future. c. increases the level of productivity. d. None of the above is correct.

c. increases the level of productivity.

The relationship between the quantity of output created and the quantity of inputs needed to create it is called a. the capital accumulation function. b. technological knowledge. c. the production function. d. human capital.

c. the production function.

Productivity is defined as a. the amount of difficulty that is involved in producing a given quantity of goods and services. b. the quantity of labor that is required to produce one unit of goods and services. c. the quantity of goods and services produced from each unit of labor input. d. the quantity of goods and services produced over a given amount of time.

c. the quantity of goods and services produced from each unit of labor input.

"When workers already have a large quantity of capital to use in producing goods and services, giving them an additional unit of capital increases their productivity only slightly." This statement a. represents the traditional view of the production process. b. is an assertion that capital is subject to diminishing returns. c. is made under the assumption that the quantities of human capital, natural resources, and technology are being held constant. d. All of the above are correct.

d. All of the above are correct.

Which of the following items plays a role in determining productivity? (Y/L = AF(K/L, H/L, N/L) a. physical capital b. natural resources c. technological knowledge d. All of the above are correct.

d. All of the above are correct.

Which of the following would increase productivity? a. an increase in the physical capital stock per worker b. an increase in human capital per worker c. an increase in natural resources per worker d. All of the above are correct.

d. All of the above are correct.

Which of the following countries benefited significantly from the catch-up effect in the last half of the twentieth century? a. Ethiopia b. the United States c. Canada d. South Korea

d. South Korea

Figure 1. On the horizontal axis, K/L represents capital (K) per worker (L). On the vertical axis, Y/L represents output (Y) per worker (L). 20. Refer to Figure 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.

d. diminishing returns to labor.

Productivity a. is nearly the same across countries, and so provides no help explaining differences in the standard of living across countries. b. explains very little of the differences in the standard of living across countries. c. explains some, but not most of the differences in the standard of living across countries. d. explains most of the differences in the standard of living across countries.

d. explains most of the differences in the standard of living across countries.

Proprietary technology is knowledge that is a. known but no longer used much. b. known, but only recently discovered. c. known mostly by only those in a certain profession. d. known only by the company that discovered it.

d. known only by the company that discovered it.

In a particular production process, if the quantities of all inputs used are increased by 60 percent, then the quantity of output increases by 60 percent as well. This means that a. the production process cannot be enhanced by technological advances. b. no mathematical representation of the relevant production function can be formulated. c. the relevant production function has the limits-to-growth property. d. the relevant production function has the constant-returns-to-scale property.

d. the relevant production function has the constant-returns-to-scale property.