Question 1

Firms will continue to increase their purchase of factor inputs as long as ________.

Accepted Answer

A)  the marginal product of a given factor is greater than its real factor price 
B)  the marginal cost of a given factor is lower than its marginal product 
C)  their total revenues are greater than their total costs 
D)  all of the above 
E)  none of the above 
A)  the marginal product of a given factor is greater than its real factor price 
B)  the marginal cost of a given factor is lower than its marginal product 
C)  their total revenues are greater than their total costs 
D)  all of the above 
E)  none of the above

Question 2

Assume that an economy is in equilibrium when technological progress causes an increase in total factor productivity. Once the economy has adjusted to its new equilibrium, and assuming that the supplies of capital and labor remain unchanged, which of the following has increased?

Accepted Answer

A)  the real wage 
B)  the share of capital income in national income 
C)  the share of labor income in national income 
D)  all of the above 
E)  none of the above 
A)  the real wage 
B)  the share of capital income in national income 
C)  the share of labor income in national income 
D)  all of the above 
E)  none of the above

Question 3

An example of a supply shock could be ________.

Accepted Answer

A)  a technological innovation 
B)  a natural disaster 
C)  an oil price increase 
D)  all of the above 
E)  none of the above 
A)  a technological innovation 
B)  a natural disaster 
C)  an oil price increase 
D)  all of the above 
E)  none of the above

Question 4

Key determinants of economic profit include ________.

Accepted Answer

A)  the revenue from selling goods and services 
B)  the cost incurred in buying capital 
C)  the cost of hiring labor 
D)  all of the above 
E)  none of the above 
A)  the revenue from selling goods and services 
B)  the cost incurred in buying capital 
C)  the cost of hiring labor 
D)  all of the above 
E)  none of the above

Question 5

As the amount of labor input increases ________. This means that the marginal product of labor (MPL)________.

Accepted Answer

A)  the slope of the production function increases; goes up 
B)  the slope of the production function falls; declines 
C)  the slope of the production function falls; goes up 
D)  the slope of the production function increases; declines 
E)  none of the above 
A)  the slope of the production function increases; goes up 
B)  the slope of the production function falls; declines 
C)  the slope of the production function falls; goes up 
D)  the slope of the production function increases; declines 
E)  none of the above

Question 6

Suppose that reduced barriers to international financial transactions cause an increase in the economy's supply of capital. Explain, step-by-step, how the economy adjusts to arrive at a new long-run equilibrium.

Accepted Answer

The increase in the supply of capital (r

Question 7

The marginal product of labor (MPL) measures ________.

Accepted Answer

A)  by how much labor increases for each additional unit of output 
B)  by how much labor increases for each additional unit of capital 
C)  by how much total factor productivity increases for each additional unit of labor 
D)  by how much labor increases for each additional unit of productivity 
E)  by how much output increases for each additional unit of labor 
A)  by how much labor increases for each additional unit of output 
B)  by how much labor increases for each additional unit of capital 
C)  by how much total factor productivity increases for each additional unit of labor 
D)  by how much labor increases for each additional unit of productivity 
E)  by how much output increases for each additional unit of labor

Question 8

Suppose than an economy has output Y = AK0.3L0.7, that Y equals $12 trillion, capital K is $27 trillion, and labor L is 64 million workers. Given this information, what is the closest approximation of total factor productivity A?

Accepted Answer

A)  less than 0.01 
B)  around 0.25 
C)  roughly 0.33 
D)  close to 0.4 
E)  exactly 144 
A)  less than 0.01 
B)  around 0.25 
C)  roughly 0.33 
D)  close to 0.4 
E)  exactly 144

Question 9

The marginal product of capital (MPK) is given by the ________.

Accepted Answer

A)  capital share of income + average output per unit of capital 
B)  capital share of income - average output per unit of capital 
C)  capital share of income ÷ average output per unit of capital 
D)  capital share of income × average output per unit of capital 
E)  none of the above 
A)  capital share of income + average output per unit of capital 
B)  capital share of income - average output per unit of capital 
C)  capital share of income ÷ average output per unit of capital 
D)  capital share of income × average output per unit of capital 
E)  none of the above

Question 10

A ten percent increase in total factor productivity A will increase ________.

Accepted Answer

A)  the marginal product of capital (MPK) by ten percent 
B)  the marginal product of labor (MPL) by ten percent 
C)  output by ten percent 
D)  all of the above 
E)  none of the above 
A)  the marginal product of capital (MPK) by ten percent 
B)  the marginal product of labor (MPL) by ten percent 
C)  output by ten percent 
D)  all of the above 
E)  none of the above

Question 11

An economy's total labor income is $2 trillion, and total capital income is $1 trillion. In the Cobb-Douglas production function, the exponent on capital is ________.

Accepted Answer

A)  two thirds 
B)  one half 
C)  one third 
D)  0.3 
E)  none of the above 
A)  two thirds 
B)  one half 
C)  one third 
D)  0.3 
E)  none of the above

Question 12

Given the production function Y = AKαL1-α, if the rental price of capital is 0.133, Y = 690, and K = 1,728, what is the value of the exponent α? If A = 1, and the real wage is 1.15, is this economy in a long-run equilibrium?

Accepted Answer

Since the rental price of capital equals

Question 13

Which of the following will cause an increase in the marginal product of capital (MPK)?

Accepted Answer

A)  a decrease in the quantity of labor in use 
B)  an increase in labor productivity 
C)  a decrease in the quantity of capital in use 
D)  all of the above 
E)  none of the above 
A)  a decrease in the quantity of labor in use 
B)  an increase in labor productivity 
C)  a decrease in the quantity of capital in use 
D)  all of the above 
E)  none of the above

Question 14

Economic profits differ from accounting profits because ________.

Accepted Answer

A)  the former is calculated by economists and the latter by accountants 
B)  many firms own their own capital so accounting profits do not factor this cost 
C)  most firms report economic profits once a year and accounting profits every pay period 
D)  all of the above 
E)  none of the above 
A)  the former is calculated by economists and the latter by accountants 
B)  many firms own their own capital so accounting profits do not factor this cost 
C)  most firms report economic profits once a year and accounting profits every pay period 
D)  all of the above 
E)  none of the above

Question 15

The marginal product of labor (MPL) can be calculated from the following ________.

Accepted Answer

A)  the labor share of income and the average output per unit of labor 
B)  the labor share of income and average labor per worker 
C)  output and labor 
D)  the labor share of income and output 
E)  none of the above 
A)  the labor share of income and the average output per unit of labor 
B)  the labor share of income and average labor per worker 
C)  output and labor 
D)  the labor share of income and output 
E)  none of the above

Question 16

As the capital stock increases,________. This means that the marginal product of capital (MPK)________.

Accepted Answer

A)  the slope of the production function falls; declines 
B)  the slope of the production function increases; goes up 
C)  the slope of the production function falls; goes up 
D)  the slope of the production function increases; declines 
E)  none of the above 
A)  the slope of the production function falls; declines 
B)  the slope of the production function increases; goes up 
C)  the slope of the production function falls; goes up 
D)  the slope of the production function increases; declines 
E)  none of the above

Question 17

Suppose a government tried to mandate a real wage above the equilibrium real wage. Assuming that factor markets are otherwise free and competitive, explain why the higher real wage would fail to increase the share of labor income in national income.

Accepted Answer

Given the Cobb-Douglas production functi

Question 18

An economy's production function is Y = AK0.3L0.7, and the economy's total output in equilibrium is $700 billion. Total labor income in this economy is ________.

Accepted Answer

A)  $300 billion 
B)  $233.3 billion 
C)  $210 billion 
D)  $400 billion 
E)  none of the above 
A)  $300 billion 
B)  $233.3 billion 
C)  $210 billion 
D)  $400 billion 
E)  none of the above

Question 19

The marginal product of capital (MPK) can be calculated from the following ________.

Accepted Answer

A)  the capital share of income and the average output per unit of capital 
B)  the capital share of income and average capital per worker 
C)  output and capital 
D)  the capital share of income and output 
E)  none of the above 
A)  the capital share of income and the average output per unit of capital 
B)  the capital share of income and average capital per worker 
C)  output and capital 
D)  the capital share of income and output 
E)  none of the above

Question 20

Equilibrium market prices for capital and labor are $10 and $8, respectively. Then, the economy experiences one or more supply shocks, so that the marginal product of capital is $12, and the marginal product of labor is $9. Assuming that the available quantities of capital and labor are fixed, which of the following is (are) likely to decrease as the economy approaches its new equilibrium?

Accepted Answer

A)  real rental price of capital 
B)  total output 
C)  economic profits 
D)  the quantity of capital in use 
E)  none of the above 
A)  real rental price of capital 
B)  total output 
C)  economic profits 
D)  the quantity of capital in use 
E)  none of the above

Exam 3: Aggregate Production and Productivity

Firms will continue to increase their purchase of factor inputs as long as ________.

Assume that an economy is in equilibrium when technological progress causes an increase in total factor productivity. Once the economy has adjusted to its new equilibrium, and assuming that the supplies of capital and labor remain unchanged, which of the following has increased?

An example of a supply shock could be ________.

Key determinants of economic profit include ________.

As the amount of labor input increases ________. This means that the marginal product of labor (MPL)________.

Suppose that reduced barriers to international financial transactions cause an increase in the economy's supply of capital. Explain, step-by-step, how the economy adjusts to arrive at a new long-run equilibrium.

The marginal product of labor (MPL) measures ________.

Suppose than an economy has output Y = AK0.3L0.7, that Y equals $12 trillion, capital K is $27 trillion, and labor L is 64 million workers. Given this information, what is the closest approximation of total factor productivity A?

The marginal product of capital (MPK) is given by the ________.

A ten percent increase in total factor productivity A will increase ________.

An economy's total labor income is $2 trillion, and total capital income is $1 trillion. In the Cobb-Douglas production function, the exponent on capital is ________.

Given the production function Y = AKαL1-α, if the rental price of capital is 0.133, Y = 690, and K = 1,728, what is the value of the exponent α? If A = 1, and the real wage is 1.15, is this economy in a long-run equilibrium?

Which of the following will cause an increase in the marginal product of capital (MPK)?

Economic profits differ from accounting profits because ________.

The marginal product of labor (MPL) can be calculated from the following ________.

As the capital stock increases,________. This means that the marginal product of capital (MPK)________.

Suppose a government tried to mandate a real wage above the equilibrium real wage. Assuming that factor markets are otherwise free and competitive, explain why the higher real wage would fail to increase the share of labor income in national income.

An economy's production function is Y = AK0.3L0.7, and the economy's total output in equilibrium is $700 billion. Total labor income in this economy is ________.

The marginal product of capital (MPK) can be calculated from the following ________.

The Policy and Practice of Macroeconomics

Measuring Macroeconomic Data

Saving and Investment in Closed and Open Economies

Money and Inflation

The Sources of Growth and the Solow Model

Drivers of Growth: Technology, Policy, and Institutions

Business Cycles: an Introduction

The Is Curve

Monetary Policy and Aggregate Demand

Aggregate Supply and the Phillips Curve

The Aggregate Demand and Supply Model

Macroeconomic Policy and Aggregate Demand and Supply Analysis

The Financial System and Economic Growth

Financial Crises and the Economy

Fiscal Policy and the Government Budget

Exchange Rates and International Economic Policy

Consumption and Saving

Investment

The Labor Market, Employment, and Unemployment

The Role of Expectations in Macroeconomic Policy

Modern Business Cycle Theory

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As the amount of labor input increases . This means that the marginal product of labor (MPL).

As the capital stock increases,. This means that the marginal product of capital (MPK).