Question 1

International data on the history of real GDP growth rates shows that over the last 120 years or so, rich countries got richer and poor countries got poorer.

Accepted Answer

A) True 
 B)False

Question 2

The dictator of Turan has recently begun to arbitrarily seize farms belonging to his political opponents, and he has given the farms to his friends. His friends don't know much about farming. The courts in Turan have ruled that the seizures are illegal, but the dictator has ignored the rulings. Other things equal, we would expect that the growth rate in Turan will

Accepted Answer

A)  fall temporarily, but will return to where it was when the new owners learn how to farm. 
B)  increase because the total amount of human capital in the country will increase as the new owners learn how to farm. 
C)  fall and remain lower for a long time. 
D)  not be affected unless widespread civil disorder or civil war results. 
A)  fall temporarily, but will return to where it was when the new owners learn how to farm. 
B)  increase because the total amount of human capital in the country will increase as the new owners learn how to farm. 
C)  fall and remain lower for a long time. 
D)  not be affected unless widespread civil disorder or civil war results.

Question 3

Which of the following statements is correct?

Accepted Answer

A)  Growth of productivity is the main determinant of growth in living standards. 
B)  Common knowledge and proprietary technology are both important for the economy's production of goods and services. 
C)  The terms capital and physical capital refer to the same thing. 
D)  All of the above are correct. 
A)  Growth of productivity is the main determinant of growth in living standards. 
B)  Common knowledge and proprietary technology are both important for the economy's production of goods and services. 
C)  The terms capital and physical capital refer to the same thing. 
D)  All of the above are correct.

Question 4

The one variable that stands out as the most significant explanation of large variations in living standards around the world is

Accepted Answer

A)  productivity. 
B)  population. 
C)  preferences. 
D)  prices. 
A)  productivity. 
B)  population. 
C)  preferences. 
D)  prices.

Question 5

A basic principle of economics is that a country's standard of living depends on its

Accepted Answer

A)  quantity of physical capital. 
B)  abundance of natural resources. 
C)  ability to produce goods and services. 
D)  ability to thrive economically without having to interact with other countries. 
A)  quantity of physical capital. 
B)  abundance of natural resources. 
C)  ability to produce goods and services. 
D)  ability to thrive economically without having to interact with other countries.

Question 6

Assuming diminishing returns,

Accepted Answer

A)  the increase in output growth from an increase in the saving rate rises over time, and that, other things the same, rich countries should grow faster than poor ones. 
B)  the increase in output growth from an increase in the saving rate falls over time, and that, other things the same, rich countries should grow faster than poor ones. 
C)  the increase in output growth from an increase in the saving rate rises over time, and that, other things the same, poor countries should grow faster than rich ones. 
D)  the increase in output growth from an increase in the saving rate falls over time, and that, other things the same, poor countries should grow faster than rich ones. 
A)  the increase in output growth from an increase in the saving rate rises over time, and that, other things the same, rich countries should grow faster than poor ones. 
B)  the increase in output growth from an increase in the saving rate falls over time, and that, other things the same, rich countries should grow faster than poor ones. 
C)  the increase in output growth from an increase in the saving rate rises over time, and that, other things the same, poor countries should grow faster than rich ones. 
D)  the increase in output growth from an increase in the saving rate falls over time, and that, other things the same, poor countries should grow faster than rich ones.

Question 7

The return to schooling for society is higher than the return to schooling for the individual if

Accepted Answer

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. 
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.

Question 8

Which of the following best illustrates the human capital of a survivor stranded on an island?

Accepted Answer

A)  the fishing poles she has produced 
B)  the invention of a better fishing lure 
C)  the fresh fruit and fish on and around the island 
D)  her previous training in a survival course 
A)  the fishing poles she has produced 
B)  the invention of a better fishing lure 
C)  the fresh fruit and fish on and around the island 
D)  her previous training in a survival course

Question 9

If your firm's production function has constant returns to scale, and if you double all your inputs, then your firm's productivity will

Accepted Answer

A)  not change. 
B)  increase but not double. 
C)  double. 
D)  more than double. 
A)  not change. 
B)  increase but not double. 
C)  double. 
D)  more than double.

Question 10

The catch-up effect refers to the idea that poor countries, despite their best efforts, are not likely ever to experience the economic growth rates of wealthier countries.

Accepted Answer

A) True 
 B)False

Question 11

Productivity is the

Accepted Answer

A)  key determinant of living standards, and growth in productivity is the key determinant of growth in living standards. 
B)  key determinant of living standards, but growth in productivity is not the key determinant of growth in living standards. 
C)  not the key determinant of living standards, but growth in productivity is the key determinant of growth in living standards. 
D)  not the key determinant of living standards, and growth in productivity is not the key determinant of growth in living standards. 
A)  key determinant of living standards, and growth in productivity is the key determinant of growth in living standards. 
B)  key determinant of living standards, but growth in productivity is not the key determinant of growth in living standards. 
C)  not the key determinant of living standards, but growth in productivity is the key determinant of growth in living standards. 
D)  not the key determinant of living standards, and growth in productivity is not the key determinant of growth in living standards.

Question 12

Economists differ in their views of the role of the government in promoting economic growth. A controversial idea is that government should

Accepted Answer

A)  lend support to the invisible hand by maintaining property rights and political stability. 
B)  lower barriers and impediments to free trade. 
C)  encourage capital formation. 
D)  target and subsidize specific industries important for technological progress. 
A)  lend support to the invisible hand by maintaining property rights and political stability. 
B)  lower barriers and impediments to free trade. 
C)  encourage capital formation. 
D)  target and subsidize specific industries important for technological progress.

Question 13

Is coal a produced factor of production?

Accepted Answer

No. Coal is a natural resource

Question 14

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?

Accepted Answer

A)  both output and productivity 
B)  output, but not productivity 
C)  productivity, but not output 
D)  neither productivity nor output 
A)  both output and productivity 
B)  output, but not productivity 
C)  productivity, but not output 
D)  neither productivity nor output

Question 15

How does the phenomenon of diminishing returns to capital explain the catch-up effect?

Accepted Answer

When an economy initially has a small am

Question 16

Fretonia and Libstien are the same except Fretonia has a larger capital stock. Both countries undertake policies that raise their saving rates to the same higher level. We would expect that

Accepted Answer

A)  both countries would have permanent increases in their growth rates, but the increase would initially be larger in Fretonia. 
B)  both countries would have permanent increases in their growth rates, but the increase would initially be smaller in Fretonia. 
C)  both countries would have temporary increases in their growth rates, but the increase would be larger in Fretonia. 
D)  both countries would have temporary increases in their growth rates, but the increase would be smaller in Fretonia. 
A)  both countries would have permanent increases in their growth rates, but the increase would initially be larger in Fretonia. 
B)  both countries would have permanent increases in their growth rates, but the increase would initially be smaller in Fretonia. 
C)  both countries would have temporary increases in their growth rates, but the increase would be larger in Fretonia. 
D)  both countries would have temporary increases in their growth rates, but the increase would be smaller in Fretonia.

Question 17

Country A had a population of 2,000, of whom 1,300 worked an average of 8 hours a day and had a productivity of 5.Country B had a population of 2,500, of whom 1,700 worked 8 hours a day and had productivity of 4. Country

Accepted Answer

A)  A had the higher level of real GDP and real GDP per person. 
B)  A had the higher level of real GDP and Country B had the higher level of real GDP per person 
C)  B had the higher level of real GDP and Country A had the higher level of real GDP per person 
D)  B had the higher level of real GDP and real GDP per person. 
A)  A had the higher level of real GDP and real GDP per person. 
B)  A had the higher level of real GDP and Country B had the higher level of real GDP per person 
C)  B had the higher level of real GDP and Country A had the higher level of real GDP per person 
D)  B had the higher level of real GDP and real GDP per person.

Question 18

Countries that have lower levels of real GDP per person than the United States

Accepted Answer

A)  tend to have growth rates that are higher than that of the United States. 
B)  tend to have growth rates that are about the same as that of the United States. 
C)  tend to have growth rates that are lower than that of the United States. 
D)  in some cases have growth rates that are higher than that of the United States and in other cases lower than that of the United States. 
A)  tend to have growth rates that are higher than that of the United States. 
B)  tend to have growth rates that are about the same as that of the United States. 
C)  tend to have growth rates that are lower than that of the United States. 
D)  in some cases have growth rates that are higher than that of the United States and in other cases lower than that of the United States.

Question 19

In 2011, Modern Electronics, Inc. produced 60,000 calculators, employing 80 workers, each of whom worked 8 hours per day. In 2012, the same firm produced 76,500 calculators, employing 85 workers, each of whom worked 10 hours per day. Productivity at Modern Electronics

Accepted Answer

A)  decreased by 4% 
B)  remained constant. 
C)  increased by 8.33% 
D)  increased by 27.50% 
A)  decreased by 4% 
B)  remained constant. 
C)  increased by 8.33% 
D)  increased by 27.50%

Question 20

Is physical capital a produced factor of production? Is human capital a produced factor of production?

Accepted Answer

Both physical capita

Exam 17: Production and Growth

International data on the history of real GDP growth rates shows that over the last 120 years or so, rich countries got richer and poor countries got poorer.

Which of the following statements is correct?

The one variable that stands out as the most significant explanation of large variations in living standards around the world is

A basic principle of economics is that a country's standard of living depends on its

Assuming diminishing returns,

The return to schooling for society is higher than the return to schooling for the individual if

Which of the following best illustrates the human capital of a survivor stranded on an island?

If your firm's production function has constant returns to scale, and if you double all your inputs, then your firm's productivity will

The catch-up effect refers to the idea that poor countries, despite their best efforts, are not likely ever to experience the economic growth rates of wealthier countries.

Productivity is the

Economists differ in their views of the role of the government in promoting economic growth. A controversial idea is that government should

Is coal a produced factor of production?

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?

How does the phenomenon of diminishing returns to capital explain the catch-up effect?

Fretonia and Libstien are the same except Fretonia has a larger capital stock. Both countries undertake policies that raise their saving rates to the same higher level. We would expect that

Country A had a population of 2,000, of whom 1,300 worked an average of 8 hours a day and had a productivity of 5.Country B had a population of 2,500, of whom 1,700 worked 8 hours a day and had productivity of 4. Country

Countries that have lower levels of real GDP per person than the United States

In 2011, Modern Electronics, Inc. produced 60,000 calculators, employing 80 workers, each of whom worked 8 hours per day. In 2012, the same firm produced 76,500 calculators, employing 85 workers, each of whom worked 10 hours per day. Productivity at Modern Electronics

Is physical capital a produced factor of production? Is human capital a produced factor of production?

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Elasticity and Its Application

Supply, Demand, and Government Policies

Consumers, Producers, and the Efficiency of Markets

Application: The Costs of Taxation

Application: International Trade

Externalities

Public Goods and Common Resources

The Costs of Production

Firms in Competitive Markets

Monopoly

Measuring a Nations Income

Measuring the Cost of Living

Saving, Investment, and the Financial System

The Basic Tools of Finance

Unemployment

The Monetary System

Money Growth and Inflation

Aggregate Demand and Aggregate Supply

The Influence of Monetary and Fiscal Policy on Aggregate Demand

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