Question 1

Investment in human capital has opportunity costs, but investment in physical capital does not.

Accepted Answer

A) True 
 B)False  False

Question 2

Consider the production function Y=2FL,K,H,N). Suppose F12,10,9,7)=100 and F24,20,18,14)=180. Does the production function have the property of constant returns to scale? Why or why not?

Accepted Answer

No, the production function does not have the property of constant returns to scale.
When the quantities of the inputs are 12, 10, 9, and 7, output is
2 × 100=200. When all of the outputs are doubled so that their quantities are 24, 20, 18, and 14, output is 2 × 180=360.
Doubling all inputs does not double output.

Question 3

In the fourteenth century it is estimated that deaths resulting from the bubonic plague reduced the population by about a third. Assuming diminishing returns, the decrease in population should have

Accepted Answer

A)  increased productivity and real GDP per person. 
B)  increased productivity but decreased real GDP per person. 
C)  increased real GDP per person, but decreased productivity. 
D)  decreased productivity and real GDP per person. 
A)  increased productivity and real GDP per person. 
B)  increased productivity but decreased real GDP per person. 
C)  increased real GDP per person, but decreased productivity. 
D)  decreased productivity and real GDP per person. A

Question 4

Suppose that in some country the price of silver increased from $30 per ounce to $31 per ounce during a time when the overall price level increased by 5 percent. During this period, the real price of silver

Accepted Answer

A)  increased. 
B)  decreased. 
C)  stayed the same. 
D)  might have increased, decreased or stayed the same; more information is needed to be sure. 
A)  increased. 
B)  decreased. 
C)  stayed the same. 
D)  might have increased, decreased or stayed the same; more information is needed to be sure.

Question 5

In which of the following cases can we be certain that a natural resource has become scarcer?

Accepted Answer

A)  both the demand for the resource and the supply of the resource have increased 
B)  both the demand for the resource and the supply of the resource have decreased 
C)  demand for the resource is unchanged and the supply of the resource has increased 
D)  the demand for the resource has decreased and the supply of the resource is unchanged 
A)  both the demand for the resource and the supply of the resource have increased 
B)  both the demand for the resource and the supply of the resource have decreased 
C)  demand for the resource is unchanged and the supply of the resource has increased 
D)  the demand for the resource has decreased and the supply of the resource is unchanged

Question 6

If it could increase its growth rates slightly, a country with low income would catch up with rich countries in about ten years.

Accepted Answer

A) True 
 B)False

Question 7

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

Accepted Answer

A)  double and productivity will rise. 
B)  double but productivity will not change. 
C)  more than double and productivity will rise. 
D)  more then double but productivity will not change. 
A)  double and productivity will rise. 
B)  double but productivity will not change. 
C)  more than double and productivity will rise. 
D)  more then double but productivity will not change.

Question 8

Which of the following is an example of the "brain drain?"

Accepted Answer

A)  A country's most highly educated workers emigrate to rich countries. 
B)  A country has such a poor educational system that human capital falls over time. 
C)  The population of a country grows so fast that the educational system can't keep up. 
D)  A country steals patented technology from another country. 
A)  A country's most highly educated workers emigrate to rich countries. 
B)  A country has such a poor educational system that human capital falls over time. 
C)  The population of a country grows so fast that the educational system can't keep up. 
D)  A country steals patented technology from another country.

Question 9

Suppose that an American company opens and operates a restaurant in Ireland. This is an example of

Accepted Answer

A)  foreign direct investment. American saving is used to finance Irish investment. 
B)  foreign direct investment. American saving is used to finance American investment. 
C)  foreign portfolio investment. American saving is used to finance Irish investment. 
D)  foreign portfolio investment. American saving is used to finance American investment. 
A)  foreign direct investment. American saving is used to finance Irish investment. 
B)  foreign direct investment. American saving is used to finance American investment. 
C)  foreign portfolio investment. American saving is used to finance Irish investment. 
D)  foreign portfolio investment. American saving is used to finance American investment.

Question 10

Journey Motorcycles produced 100 motorcycles using 50 workers who each worked 8 hours a day. Journey's productivity was 1/4.

Accepted Answer

A) True 
 B)False

Question 11

Research suggests that taller workers tend to earn more income than shorter workers. What does this suggest about the relationship between workers' height and their productivity?

Accepted Answer

If taller workers' earnings ar

Question 12

Mary looks over reports on four of her workers. Jack made 30 baskets in 5 hours. Rudy made 32 baskets in 8 hours. Sam made 40 baskets in 12 hours. Walter made 22 baskets in four hours. Who has the greatest productivity?

Accepted Answer

A)  Jack 
B)  Rudy 
C)  Sam 
D)  Walter 
A)  Jack 
B)  Rudy 
C)  Sam 
D)  Walter

Question 13

In recent decades Americans have increased their purchase of stocks of foreign-based companies. The Americans who have bought these stocks were engaged in

Accepted Answer

A)  foreign portfolio investment. 
B)  indirect domestic investment. 
C)  foreign direct investment. 
D)  foreign indirect investment. 
A)  foreign portfolio investment. 
B)  indirect domestic investment. 
C)  foreign direct investment. 
D)  foreign indirect investment.

Question 14

In the U.S., each additional year of schooling has historically raised a person's wage on average by about

Accepted Answer

A)  5 percent. In less developed countries the gap between the wages of educated and uneducated workers is smaller. 
B)  10 percent. In less developed countries the gap between the wages of educated and uneducated workers is smaller. 
C)  5 percent. In less developed countries the gap between the wages of educated and uneducated workers is larger. 
D)  10 percent. In less developed countries the gap between the wages of educated and uneducated workers is larger. 
A)  5 percent. In less developed countries the gap between the wages of educated and uneducated workers is smaller. 
B)  10 percent. In less developed countries the gap between the wages of educated and uneducated workers is smaller. 
C)  5 percent. In less developed countries the gap between the wages of educated and uneducated workers is larger. 
D)  10 percent. In less developed countries the gap between the wages of educated and uneducated workers is larger.

Question 15

A country with a relatively low level of real GDP per person is considering adopting two policies to promote economic growth. The first is to decrease barriers to trade. The second is to restrict foreign portfolio investment. Which of these policies do most economists say promote growth?

Accepted Answer

A)  both the first and the second 
B)  the first but not the second 
C)  the second but not the first 
D)  neither the first nor the second 
A)  both the first and the second 
B)  the first but not the second 
C)  the second but not the first 
D)  neither the first nor the second

Question 16

You bake cookies. One day you double the time you spend, double the number of chocolate chips, flour, eggs, and all your other inputs, and bake twice as many cookies. Your cookie production function has

Accepted Answer

A)  decreasing returns to scale. 
B)  zero returns to scale. 
C)  constant returns to scale. 
D)  increasing returns to scale. 
A)  decreasing returns to scale. 
B)  zero returns to scale. 
C)  constant returns to scale. 
D)  increasing returns to scale.

Question 17

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 18

Last year the imaginary nation of Freedonia had a population of 2,800 and real GDP of 16,800,000. This year it had a population of 2,700 and real GDP of 15,390,000. About what was the growth rate of real GDP per person between last year and this year?

Accepted Answer

A)  -5.3 percent 
B)  -5 percent 
C)  5 percent 
D)  5.3 percent 
A)  -5.3 percent 
B)  -5 percent 
C)  5 percent 
D)  5.3 percent

Question 19

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

Question 20

Over the period 1890-2010, Japan experienced a 2.65 percent average annual growth rate of real GDP per person.

Accepted Answer

A) True 
 B)False

Investment in human capital has opportunity costs, but investment in physical capital does not.

Consider the production function Y=2FL,K,H,N). Suppose F12,10,9,7)=100 and F24,20,18,14)=180. Does the production function have the property of constant returns to scale? Why or why not?

In the fourteenth century it is estimated that deaths resulting from the bubonic plague reduced the population by about a third. Assuming diminishing returns, the decrease in population should have

Suppose that in some country the price of silver increased from $30 per ounce to $31 per ounce during a time when the overall price level increased by 5 percent. During this period, the real price of silver

In which of the following cases can we be certain that a natural resource has become scarcer?

If it could increase its growth rates slightly, a country with low income would catch up with rich countries in about ten years.

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

Which of the following is an example of the "brain drain?"

Suppose that an American company opens and operates a restaurant in Ireland. This is an example of

Journey Motorcycles produced 100 motorcycles using 50 workers who each worked 8 hours a day. Journey's productivity was 1/4.

Research suggests that taller workers tend to earn more income than shorter workers. What does this suggest about the relationship between workers' height and their productivity?

Mary looks over reports on four of her workers. Jack made 30 baskets in 5 hours. Rudy made 32 baskets in 8 hours. Sam made 40 baskets in 12 hours. Walter made 22 baskets in four hours. Who has the greatest productivity?

In recent decades Americans have increased their purchase of stocks of foreign-based companies. The Americans who have bought these stocks were engaged in

In the U.S., each additional year of schooling has historically raised a person's wage on average by about

A country with a relatively low level of real GDP per person is considering adopting two policies to promote economic growth. The first is to decrease barriers to trade. The second is to restrict foreign portfolio investment. Which of these policies do most economists say promote growth?

You bake cookies. One day you double the time you spend, double the number of chocolate chips, flour, eggs, and all your other inputs, and bake twice as many cookies. Your cookie production function has

Last year the imaginary nation of Freedonia had a population of 2,800 and real GDP of 16,800,000. This year it had a population of 2,700 and real GDP of 15,390,000. About what was the growth rate of real GDP per person between last year and this year?

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

Over the period 1890-2010, Japan experienced a 2.65 percent average annual growth rate of real GDP per person.

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Measuring a Nations Income

Measuring the Cost of Living

Saving, Investment, and the Financial System

The Basic Tools of Finance

Unemployment and Its Natural Rate

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 Tradeoff Between Inflation and Unemployment

Six Debates Over Macroeconomic Policy

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Exam 7: Production and Growth

Investment in human capital has opportunity costs, but investment in physical capital does not.

Consider the production function Y=2FL,K,H,N). Suppose F12,10,9,7)=100 and F24,20,18,14)=180. Does the production function have the property of constant returns to scale? Why or why not?

In the fourteenth century it is estimated that deaths resulting from the bubonic plague reduced the population by about a third. Assuming diminishing returns, the decrease in population should have

Suppose that in some country the price of silver increased from $30 per ounce to $31 per ounce during a time when the overall price level increased by 5 percent. During this period, the real price of silver

In which of the following cases can we be certain that a natural resource has become scarcer?

If it could increase its growth rates slightly, a country with low income would catch up with rich countries in about ten years.

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

Which of the following is an example of the "brain drain?"

Suppose that an American company opens and operates a restaurant in Ireland. This is an example of

Journey Motorcycles produced 100 motorcycles using 50 workers who each worked 8 hours a day. Journey's productivity was 1/4.

Research suggests that taller workers tend to earn more income than shorter workers. What does this suggest about the relationship between workers' height and their productivity?

Mary looks over reports on four of her workers. Jack made 30 baskets in 5 hours. Rudy made 32 baskets in 8 hours. Sam made 40 baskets in 12 hours. Walter made 22 baskets in four hours. Who has the greatest productivity?

In recent decades Americans have increased their purchase of stocks of foreign-based companies. The Americans who have bought these stocks were engaged in

In the U.S., each additional year of schooling has historically raised a person's wage on average by about

A country with a relatively low level of real GDP per person is considering adopting two policies to promote economic growth. The first is to decrease barriers to trade. The second is to restrict foreign portfolio investment. Which of these policies do most economists say promote growth?

You bake cookies. One day you double the time you spend, double the number of chocolate chips, flour, eggs, and all your other inputs, and bake twice as many cookies. Your cookie production function has

Last year the imaginary nation of Freedonia had a population of 2,800 and real GDP of 16,800,000. This year it had a population of 2,700 and real GDP of 15,390,000. About what was the growth rate of real GDP per person between last year and this year?

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

Over the period 1890-2010, Japan experienced a 2.65 percent average annual growth rate of real GDP per person.

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Measuring a Nations Income

Measuring the Cost of Living

Saving, Investment, and the Financial System

The Basic Tools of Finance

Unemployment and Its Natural Rate

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 Tradeoff Between Inflation and Unemployment

Six Debates Over Macroeconomic Policy

Filters