Question 1

The law of diminishing marginal product to capital means that as we add additional units of capital:

Accepted Answer

A)  and labor, output will increase, but at a constant rate. 
B)  and labor, output will increase, but at a decreasing rate. 
C)  but hold labor constant, output will increase, but at an increasing rate. 
D)  but hold labor constant, output will increase, but at a constant rate. 
E)  but hold labor constant, output will increase, but at a decreasing rate. 
A)  and labor, output will increase, but at a constant rate. 
B)  and labor, output will increase, but at a decreasing rate. 
C)  but hold labor constant, output will increase, but at an increasing rate. 
D)  but hold labor constant, output will increase, but at a constant rate. 
E)  but hold labor constant, output will increase, but at a decreasing rate.

Question 2

In the Cobb-Douglas production function   the $\alpha$represents:

Accepted Answer

A)  total income. 
B)  the share of production contributed by labor. 
C)  the total amount of capital in an economy. 
D)  the total demand for capital in an economy. 
E)  the share of production contributed by capital. 
A)  total income. 
B)  the share of production contributed by labor. 
C)  the total amount of capital in an economy. 
D)  the total demand for capital in an economy. 
E)  the share of production contributed by capital.

Question 3

Write down the firm's profit maximizing problem. Be sure to identify the variables the firm can choose and which it takes as given. What should the firm facing the following scenarios do?
• The marginal product of capital is greater than the rental price of capital.
• The marginal product of labor is less than the wage.

Accepted Answer

The firm maximizes profits, which are eq

Question 4

The equation   is an example of:

Accepted Answer

A)  a consumption function. 
B)  a utility function. 
C)  a production function. 
D)  the production possibilities frontier. 
E)  a growth model. 
A)  a consumption function. 
B)  a utility function. 
C)  a production function. 
D)  the production possibilities frontier. 
E)  a growth model.

Question 5

Refer to the following table when answering the following questions.
Table 4.1: Production Model's Prediction for Per Capita GDP (US = 1)   (Source: Penn World Tables 9.0)
-Considering the data in Table 4.1, the explanation for the difference between the predicted and actual level of output is called ________. If you compare South Africa's observed and predicted output, this difference is equal to ________.

Accepted Answer

A)  total factor productivity; 0.37 
B)  the Solow residual; 2.71 
C)  Dirac's delta; 0.14 
D)  capital's share of GDP; one-third 
E)  labor's share of GDP; two-thirds 
A)  total factor productivity; 0.37 
B)  the Solow residual; 2.71 
C)  Dirac's delta; 0.14 
D)  capital's share of GDP; one-third 
E)  labor's share of GDP; two-thirds

Question 6

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

Accepted Answer

A)  institutions 
B)  human capital 
C)  infrastructure 
D)  legal structure 
E)  All of these answers are correct. 
A)  institutions 
B)  human capital 
C)  infrastructure 
D)  legal structure 
E)  All of these answers are correct.

Question 7

For efficient allocation of resources ________ and ________ must be equal across firms.

Accepted Answer

A)  the marginal product of capital; the marginal product of labor 
B)  nominal wages; real wages 
C)  the capital stock; the labor stock 
D)  unemployment must be equal to its natural rate; wages 
E)  net exports should be zero; the marginal product of capital 
A)  the marginal product of capital; the marginal product of labor 
B)  nominal wages; real wages 
C)  the capital stock; the labor stock 
D)  unemployment must be equal to its natural rate; wages 
E)  net exports should be zero; the marginal product of capital

Question 8

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

Accepted Answer

A)  institutions 
B)  human capital 
C)  natural resources 
D)  technology 
E)  All of these answers are correct. 
A)  institutions 
B)  human capital 
C)  natural resources 
D)  technology 
E)  All of these answers are correct.

Question 9

Refer to the following figure when answering the following questions.
Figure 4.2: The Production Function  
-Consider Figure 4.2. The shape of this production function suggests:

Accepted Answer

A)  a constant marginal product of capital. 
B)  a diminishing marginal product of capital. 
C)  a diminishing marginal product of labor. 
D)  an increasing marginal product of capital. 
E)  Not enough information is given. 
A)  a constant marginal product of capital. 
B)  a diminishing marginal product of capital. 
C)  a diminishing marginal product of labor. 
D)  an increasing marginal product of capital. 
E)  Not enough information is given.

Question 10

In models with perfect competition:

Accepted Answer

A)  economic profits are always positive. 
B)  accounting profits are zero. 
C)  income paid to labor is the same as is paid to capital. 
D)  the real interest rate is equal to the nominal interest rate. 
E)  economic profits are zero. 
A)  economic profits are always positive. 
B)  accounting profits are zero. 
C)  income paid to labor is the same as is paid to capital. 
D)  the real interest rate is equal to the nominal interest rate. 
E)  economic profits are zero.

Question 11

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   , is 0.18. What is total factor productivity?

Accepted Answer

A)  0.44 
B)  0.98 
C)  0.06 
D)  0.00 
E)  18.00 
A)  0.44 
B)  0.98 
C)  0.06 
D)  0.00 
E)  18.00

Question 12

The case of the economic reforms in Russia and China provides insight into differences in:

Accepted Answer

A)  the production model and Total Factor Productivity. 
B)  the labor market. 
C)  the "Big Bang" versus gradualist approach to development. 
D)  an export-led development model. 
E)  political cronyism. 
A)  the production model and Total Factor Productivity. 
B)  the labor market. 
C)  the "Big Bang" versus gradualist approach to development. 
D)  an export-led development model. 
E)  political cronyism.

Question 13

State whether the following production functions exhibit increasing, constant, or decreasing returns to scale in K and L.
(a)   
(b)   
(c)

Accepted Answer

The answer to this lies in multiplying e

Question 14

Which of the following production functions exhibits increasing returns to scale?

Accepted Answer

A)    
B)    
C)    
D)    
E)  All of these answers are correct. 
A)    
B)    
C)    
D)    
E)  All of these answers are correct.

Question 15

Throughout the text, a simplifying assumption was made in the production function model of economic growth: the capital share, $\alpha$, is set equal to one-third. But this is not necessarily the case; indeed, $\alpha$ can be any number greater than zero and less than one. Consider two economies, H and L, with different capital shares, $\alpha$H   $\gt$ $\alpha$L. Which country will get more output for each unit of capital added? Explain.

Accepted Answer

Country H will get more output from each

Question 16

If the production function is given by   
, the marginal product of capital is (1/3)(Y/K).

Accepted Answer

A) True 
 B)False

Question 17

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

Accepted Answer

A)  the labor stock 
B)  the share of capital in GDP 
C)  the share of labor in GDP 
D)  the stock of capital 
E)  All of these answers are correct. 
A)  the labor stock 
B)  the share of capital in GDP 
C)  the share of labor in GDP 
D)  the stock of capital 
E)  All of these answers are correct.

Question 18

Which of the following is/are essential for economic success?

Accepted Answer

A)  property rights 
B)  the rule of law 
C)  contract enforcement 
D)  the separation of powers 
E)  All of these answers are correct. 
A)  property rights 
B)  the rule of law 
C)  contract enforcement 
D)  the separation of powers 
E)  All of these answers are correct.

Question 19

With a Cobb-Douglas production function   , the marginal product of capital is ________ and the marginal product of labor is ________.

Accepted Answer

A)  MPK = (1/3)(Y/K); MPL = (2/3)(Y/L) 
B)  MPK =(2/3)(Y/K); MPL = (1/3)(Y/L) 
C)  MPK=(2/3)(Y/K); MPL = (2/3)(Y/L) 
D)  MPK =0 (1/3)(Y/K); MPL = (1/3)(Y/L) 
E)  None of these answers is correct. 
A)  MPK = (1/3)(Y/K); MPL = (2/3)(Y/L) 
B)  MPK =(2/3)(Y/K); MPL = (1/3)(Y/L) 
C)  MPK=(2/3)(Y/K); MPL = (2/3)(Y/L) 
D)  MPK =0 (1/3)(Y/K); MPL = (1/3)(Y/L) 
E)  None of these answers is correct.

Question 20

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   , is 1.06. What is total factor productivity?

Accepted Answer

A)  0.75 
B)  1.05 
C)  1.39 
D)  0.81 
E)  0.72 
A)  0.75 
B)  1.05 
C)  1.39 
D)  0.81 
E)  0.72

The law of diminishing marginal product to capital means that as we add additional units of capital:

In the Cobb-Douglas production function $In the Cobb-Douglas production function the \alpha represents:$ the $\alpha$ represents:

The equation is an example of:

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

For efficient allocation of resources and must be equal across firms.

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

Refer to the following figure when answering the following questions. Figure 4.2: The Production Function -Consider Figure 4.2. The shape of this production function suggests:

In models with perfect competition:

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 , is 0.18. What is total factor productivity?

The case of the economic reforms in Russia and China provides insight into differences in:

State whether the following production functions exhibit increasing, constant, or decreasing returns to scale in K and L. (a) (b) (c)

Which of the following production functions exhibits increasing returns to scale?

If the production function is given by , the marginal product of capital is (1/3)(Y/K).

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

Which of the following is/are essential for economic success?

With a Cobb-Douglas production function , the marginal product of capital is and the marginal product of labor is .

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 , is 1.06. What is total factor productivity?

Introduction to Macroeconomics

Measuring the Macroeconomy

An Overview of Long-Run Economic Growth

The Solow Growth Model

Growth and Ideas

The Labor Market, Wages, and Unemployment

Inflation

An Introduction to the Short Run

The Great Recession: a First Look

The Is Curve

Monetary Policy and the Phillips Curve

Stabilization Policy and the Asad Framework

The Great Recession and the Short-Run Model

Dsge Models: the Frontier of Business Cycle Research

Consumption

Investment

The Government and the Macroeconomy

International Trade

Exchange Rates and International Finance

Parting Thoughts

Filters

Exam 4: A Model of Production

The law of diminishing marginal product to capital means that as we add additional units of capital:

In the Cobb-Douglas production function the α\alphaα represents:

The equation is an example of:

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

For efficient allocation of resources ________ and ________ must be equal across firms.

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

Refer to the following figure when answering the following questions. Figure 4.2: The Production Function -Consider Figure 4.2. The shape of this production function suggests:

In models with perfect competition:

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 , is 0.18. What is total factor productivity?

The case of the economic reforms in Russia and China provides insight into differences in:

State whether the following production functions exhibit increasing, constant, or decreasing returns to scale in K and L. (a) (b) (c)

Which of the following production functions exhibits increasing returns to scale?

If the production function is given by , the marginal product of capital is (1/3)(Y/K).

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

Which of the following is/are essential for economic success?

With a Cobb-Douglas production function , the marginal product of capital is ________ and the marginal product of labor is ________.

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 , is 1.06. What is total factor productivity?

Introduction to Macroeconomics

Measuring the Macroeconomy

An Overview of Long-Run Economic Growth

The Solow Growth Model

Growth and Ideas

The Labor Market, Wages, and Unemployment

Inflation

An Introduction to the Short Run

The Great Recession: a First Look

The Is Curve

Monetary Policy and the Phillips Curve

Stabilization Policy and the Asad Framework

The Great Recession and the Short-Run Model

Dsge Models: the Frontier of Business Cycle Research

Consumption

Investment

The Government and the Macroeconomy

International Trade

Exchange Rates and International Finance

Parting Thoughts

Filters

In the Cobb-Douglas production function $In the Cobb-Douglas production function the \alpha represents:$ the $\alpha$ represents:

For efficient allocation of resources and must be equal across firms.

With a Cobb-Douglas production function , the marginal product of capital is and the marginal product of labor is .