Question 1

Country A experienced a growth rate of real GDP per person of 0.5 percent per year throughout the 1900's. In view of other countries' experiences, country A's growth was

Accepted Answer

A)  exceptionally high. 
B)  moderately high. 
C)  moderately low. 
D)  exceptionally low. 
A)  exceptionally high. 
B)  moderately high. 
C)  moderately low. 
D)  exceptionally low.

Question 2

Why does a nation's standard of living depend on property rights?

Accepted Answer

Property rights are an important prerequ

Question 3

If companies from foreign countries build and operate factories in China, then China's productivity

Accepted Answer

A)  and the wages of Chinese workers increase. 
B)  increases but the wages of Chinese workers decrease. 
C)  decreases but the wages of Chinese workers increase. 
D)  and the wages of Chinese workers decrease. 
A)  and the wages of Chinese workers increase. 
B)  increases but the wages of Chinese workers decrease. 
C)  decreases but the wages of Chinese workers increase. 
D)  and the wages of Chinese workers decrease.

Question 4

The same size decrease in the amount of capital stock per worker will cause output per worker to fall by more in a country with a relatively high level of capital per worker than in a country with a relatively low level of capital per worker.

Accepted Answer

A) True 
 B)False

Question 5

The catch-up effect refers to the idea that

Accepted Answer

A)  saving will always catch-up with investment spending. 
B)  it is easier for a country to grow fast and so catch-up if it starts out relatively poor. 
C)  population eventually catches-up with increased output. 
D)  if investment spending is low, increased saving will help investment to "catch-up." 
A)  saving will always catch-up with investment spending. 
B)  it is easier for a country to grow fast and so catch-up if it starts out relatively poor. 
C)  population eventually catches-up with increased output. 
D)  if investment spending is low, increased saving will help investment to "catch-up."

Question 6

A barber shop produces 192 haircuts a day. Each barber in the shop works 8 hours per day and produces the same number of haircuts per hour. If the shop's productivity is 2 haircuts per hour of labor, then how many barbers does the shop employ?

Accepted Answer

A)  8 
B)  12 
C)  16 
D)  None of the above is correct. 
A)  8 
B)  12 
C)  16 
D)  None of the above is correct.

Question 7

In a market economy, we know that a resource has become scarcer when

Accepted Answer

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. 
B)  it is non-renewable and some of it is used. 
C)  people search for substitutes. 
D)  All of the above are correct.

Question 8

A leading environmental group recently published a report contending that humans are running a "resource deficit" because we are using natural resources faster than they can be regenerated. The group claims that this means that economic growth will eventually stop, and will even be reversed. An economist would

Accepted Answer

A)  agree with the report, and would point to rising natural resource prices as evidence. 
B)  agree with the report, but wouldn't think it was important because growth will not slow down for several centuries. 
C)  disagree with the report, in part because it ignores the mitigating effects of technological change. 
D)  disagree with the report because labor and capital are the primary determinants of growth, and since they are plentiful, growth will not slow down. 
A)  agree with the report, and would point to rising natural resource prices as evidence. 
B)  agree with the report, but wouldn't think it was important because growth will not slow down for several centuries. 
C)  disagree with the report, in part because it ignores the mitigating effects of technological change. 
D)  disagree with the report because labor and capital are the primary determinants of growth, and since they are plentiful, growth will not slow down.

Question 9

Senator Noitall says that in order to help poor countries develop, the United States should: 1. Encourage poor countries to allow U.S. and other foreign firms to build and operate businesses in their country; 2. Reduce or eliminate subsidizes to U.S. producers when poor countries have a comparative advantage producing those goods the U.S. subsidizes; 3. Work to promote political stability in poor countries; and 4. Reduce poor countries reliance on market forces in their economies. How many of these ideas are likely to help poor countries grow?

Accepted Answer

A)  1 
B)  2 
C)  3 
D)  4 
A)  1 
B)  2 
C)  3 
D)  4

Question 10

A professor at a university finds a way to reduce the costs of producing automobile glass. The method is very easy for anyone to copy. A company develops a substance which prevents eyeglasses from smudging. It receives a patent on the formula. Which of these are common technological knowledge?

Accepted Answer

A)  the method to reduce costs of producing automobile glass, and the formula for the substance that prevents smudging 
B)  the method to reduce costs of producing automobile glass, but not the formula for the substance that prevents smudging 
C)  the formula for the substance that prevents smudging, but not the method to reduce costs of producing automobile glass 
D)  neither the method to reduce costs of producing automobile glass nor the formula for the substance that prevents smudging 
A)  the method to reduce costs of producing automobile glass, and the formula for the substance that prevents smudging 
B)  the method to reduce costs of producing automobile glass, but not the formula for the substance that prevents smudging 
C)  the formula for the substance that prevents smudging, but not the method to reduce costs of producing automobile glass 
D)  neither the method to reduce costs of producing automobile glass nor the formula for the substance that prevents smudging

Question 11

In 2010, income per person in the United States was about 14 times that in India.

Accepted Answer

A) True 
 B)False

Question 12

Which of the following is an example of human capital?

Accepted Answer

A)  a student loan 
B)  knowledge learned from reading books 
C)  training videos for new corporate employees 
D)  All of the above are correct. 
A)  a student loan 
B)  knowledge learned from reading books 
C)  training videos for new corporate employees 
D)  All of the above are correct.

Question 13

Country A and country B are the same except country A currently has more capital. Assuming diminishing returns, if both countries increase their capital by 100 units and other factors that determine output are unchanged, then

Accepted Answer

A)  output in country A increases by more than in country B. 
B)  output in country A increases by the same amount as in country B. 
C)  output in country A increases by less than in country B. 
D)  None of the above is necessarily correct. 
A)  output in country A increases by more than in country B. 
B)  output in country A increases by the same amount as in country B. 
C)  output in country A increases by less than in country B. 
D)  None of the above is necessarily correct.

Question 14

Constant returns to scale is the point on a production function where increasing inputs will no longer increase output.

Accepted Answer

A) True 
 B)False

Question 15

All else equal, if there are diminishing returns, then what happens to productivity if both capital and labor increase?

Accepted Answer

A)  Productivity will definitely fall. 
B)  Productivity will definitely be unchanged. 
C)  Productivity will definitely rise. 
D)  None of the above are necessarily correct. 
A)  Productivity will definitely fall. 
B)  Productivity will definitely be unchanged. 
C)  Productivity will definitely rise. 
D)  None of the above are necessarily correct.

Question 16

In 2011 Buckeye Brewing produced 1,000 bottles of ginger ale each day. It employed 10 workers each working 8 hours a day. In 2012 it produced 960 bottles of ginger ale each day employing 8 workers who worked 8 hours each day. Productivity at Buckeye Brewing

Accepted Answer

A)  increased by 20%. 
B)  increased by 16.67%. 
C)  decreased by 1.67%. 
D)  decreased by 40%. 
A)  increased by 20%. 
B)  increased by 16.67%. 
C)  decreased by 1.67%. 
D)  decreased by 40%.

Question 17

If an inexpensive alternative to oil were found, the price of oil adjusted for inflation

Accepted Answer

A)  would decline as the alternative would reduce the demand for oil. 
B)  would decline as the alternative would reduce the supply of oil. 
C)  would increase as the alternative would increase the demand for oil. 
D)  would increase as the alternative would increase the supply of oil. 
A)  would decline as the alternative would reduce the demand for oil. 
B)  would decline as the alternative would reduce the supply of oil. 
C)  would increase as the alternative would increase the demand for oil. 
D)  would increase as the alternative would increase the supply of oil.

Question 18

Other things the same, if a country increased its saving rate, in 40 years or so it would likely have

Accepted Answer

A)  higher productivity, and a higher growth rate of real GDP. 
B)  higher productivity, but not a higher growth rate of real GDP. 
C)  the same productivity and growth of real GDP it began with. 
D)  None of the above is correct. 
A)  higher productivity, and a higher growth rate of real GDP. 
B)  higher productivity, but not a higher growth rate of real GDP. 
C)  the same productivity and growth of real GDP it began with. 
D)  None of the above is correct.

Question 19

Industrial machinery is an example of

Accepted Answer

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. 
B)  technological knowledge. 
C)  a production function. 
D)  an item which always has the property called constant returns to scale.

Question 20

A country that made its courts less corrupt and its government more stable would likely see its standard of living rise.

Accepted Answer

A) True 
 B)False

Exam 12: Production and Growth

Country A experienced a growth rate of real GDP per person of 0.5 percent per year throughout the 1900's. In view of other countries' experiences, country A's growth was

Why does a nation's standard of living depend on property rights?

If companies from foreign countries build and operate factories in China, then China's productivity

The same size decrease in the amount of capital stock per worker will cause output per worker to fall by more in a country with a relatively high level of capital per worker than in a country with a relatively low level of capital per worker.

The catch-up effect refers to the idea that

A barber shop produces 192 haircuts a day. Each barber in the shop works 8 hours per day and produces the same number of haircuts per hour. If the shop's productivity is 2 haircuts per hour of labor, then how many barbers does the shop employ?

In a market economy, we know that a resource has become scarcer when

A professor at a university finds a way to reduce the costs of producing automobile glass. The method is very easy for anyone to copy. A company develops a substance which prevents eyeglasses from smudging. It receives a patent on the formula. Which of these are common technological knowledge?

In 2010, income per person in the United States was about 14 times that in India.

Which of the following is an example of human capital?

Country A and country B are the same except country A currently has more capital. Assuming diminishing returns, if both countries increase their capital by 100 units and other factors that determine output are unchanged, then

Constant returns to scale is the point on a production function where increasing inputs will no longer increase output.

All else equal, if there are diminishing returns, then what happens to productivity if both capital and labor increase?

In 2011 Buckeye Brewing produced 1,000 bottles of ginger ale each day. It employed 10 workers each working 8 hours a day. In 2012 it produced 960 bottles of ginger ale each day employing 8 workers who worked 8 hours each day. Productivity at Buckeye Brewing

If an inexpensive alternative to oil were found, the price of oil adjusted for inflation

Other things the same, if a country increased its saving rate, in 40 years or so it would likely have

Industrial machinery is an example of

A country that made its courts less corrupt and its government more stable would likely see its standard of living rise.

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

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

Open-Economy Macroeconomics: Basic Concepts

A Macroeconomic Theory of the Open Economy

Aggregate Demand and Aggregate Supply

The Influence of Monetary and Fiscal Policy on Aggregate Demand

The Short-Run Trade-Off Between Inflation and Unemployment

Six Debates Over Macroeconomic Policy

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