Deck 9: Productivity and Economic Growth

Question 1

Prior to 1800, productivity growth averaged

A) 1 percent per year.
B) 0 percent per year.
C) .5 percent per year.
D) 3 percent per year.
E) 2 percent per year.

Answer 1

0 percent per year.

Question 2

The flattening out of the production function is likely to occur

A) only in a model without capital or technology.
B) in any model where there are fixed factors.
C) only in a model without labor.
D) only in a model without technology.
E) only in a model with labor, capital, and technology.

Answer 2

in any model where there are fixed factors.

Question 3

Increases in labor, according to the theory of economic growth,

A) increase productivity but not the growth of real GDP.
B) increase neither productivity growth nor the growth of real GDP.
C) increase both productivity and the growth of real GDP.
D) increase the growth of real GDP but not productivity.
E) have an uncertain effect on both productivity and real GDP.

Answer 3

increase the growth of real GDP but not productivity.

Question 4

Productivity continues to grow in the twenty-first century, and in particular it is spreading to countries like India and China.

Question 5

Which of the following is true?

A) Economic growth began to accelerate during the Industrial Revolution.
B) There has always been economic growth.
C) Economic growth rates were highest during the Industrial Revolution.
D) All of these
E) The best measure of economic growth is the growth rate of output.

Question 6

The late 1700s and early 1800s represent a period in which productivity grew significantly, and they are thus known by historians as the Industrial Revolution.

Question 7

Which of the following statements is true about the production function Y =F(L,K)?

A) Output increases only when both labor and capital increase.
B) An increase in labor causes output to increase but an increase in capital will not cause output to increase unless it is accompanied by an increase in labor.
C) An increase in capital causes output to increase but an increase in labor will not cause output to increase unless it is accompanied by an increase in capital.
D) An increase in capital causes an increase in capital.
E) It is possible for output to increase if capital increases, even if there is no change in the labor input.

Question 8

The rationale for developing a model in which real GDP depends only on labor is

A) to prove that productivity growth was higher before the Industrial Revolution.
B) to prove that capital and technology play a key role in productivity growth.
C) to prove that productivity growth can occur without capital.
D) to prove that productivity growth can occur without technology.
E) to prove that labor is a key source of productivity growth.

Question 9

The flattening out of the production function is due to

A) the declining opportunity cost of labor.
B) the increasing scarcity of labor.
C) increasing returns to labor.
D) all other factors being held constant.
E) the increasing specialization of labor.

Question 10

Which of the following should be focused on to explain the growth of productivity?

A) The growth of labor and capital
B) The growth of capital and technology
C) The growth of labor and technology
D) The growth of the labor force
E) The natural rate of unemployment

Question 11

Which of the following is true?

A) Growth in capital alone explains virtually all of the recent growth in productivity.
B) Economic policies cannot influence the growth of productivity in the economy.
C) Increases in labor will increase real GDP per hour of work.
D) The growth of productivity is determined by the available labor, capital, and technology.
E) Increasing the investment share of GDP will increase the growth of capital.

Question 12

Diminishing returns to labor exists

A) in any economy.
B) only in an economy where most of the output comes from the agricultural sector.
C) only in an economy with no technological growth.
D) only in a pre-Industrial Revolution economy.
E) only in an economy with no capital and technology.

Question 13

A theory without capital or technology

A) is of limited use because there have always been capital and technology.
B) is useful for illustrating production and economic conditions in the time before the Industrial Revolution.
C) None of these
D) is useful for illustrating the importance of population growth in improving the standard of living.
E) is capable of explaining productivity growth.

Question 14

Diminishing returns to labor means that

A) the greater the amount of output, the less labor that is needed.
B) as more labor is employed, total output declines.
C) as more labor is employed, each additional worker produces less additional output.
D) as more labor is employed, total output will increase.
E) the greater the amount of output, the less additional labor that is needed.

Question 15

Productivity is commonly defined as output per hour of work.

Question 16

As more capital is added per worker, the production function

A) shifts down in smaller increments.
B) gets flatter.
C) shifts up in smaller increments.
D) gets steeper.
E) shifts up in larger increments.

Question 17

Consider the production function shown in the figure below. An increase in capital will result in

A) a downward shift in the production function.
B) the slope of the production function becoming flatter.
C) a leftward movement along the production function.
D) a rightward movement along the production function.
E) an upward shift in the production function.

Question 18

Productivity is defined as

A) output per person.
B) output per unit of capital.
C) output per unit of technology.
D) output per hour of work.
E) output per unit of full-time employment.

Question 19

The total amount of capital in the economy increases each year by that year's amount of

A) gross investment.
B) net investment.
C) GDP.
D) private saving.
E) government saving.

Question 20

When capital is included in the production function,

A) less output is produced with the same amount of labor.
B) more output is produced with the same amount of labor.
C) diminishing returns to labor are eliminated.
D) the production function exhibits increasing returns to labor.
E) the production function exhibits constant returns to labor.

Question 21

Using a graphical representation of the production function, show what is meant by diminishing returns to capital.

Question 22

Diminishing marginal returns can be associated with the popular notion of "too many cooks in a kitchen," in the sense that as we increase the number of people cooking in a reduced space they may bump into each other and therefore not be as productive as they would be in a larger workplace.

Question 23

Institutions include all the following EXCEPT

A) the legal system.
B) the political system.
C) the regulatory system.
D) copyright protection.
E) the design of jail cells.

Question 24

Why is the model with both capital and labor not sufficient to explain growth in productivity?

Question 25

According to economist Daron Acemoglu, technology is a fundamental cause of economic growth.

Question 26

According to economist Daron Acemoglu, proximate causes of economic growth include of the following EXCEPT

A) physical capital.
B) human capital
C) technology.
D) the legal system.
E) None of these

Question 27

According to economist Daron Acemoglu, human capital is a proximate cause of economic growth.

Question 28

Capital is not subject to diminishing returns.

Question 29

Which of the following statements is true about an economy whose production function includes only capital and labor?

A) Diminishing returns to capital can occur for the economy as a whole.
B) Adding more capital per worker cannot raise real GDP beyond some limit.
C) The production function yields a pessimistic conclusion about economic growth.
D) To get to the point where the return from an additional unit of capital equals zero requires an extremely large investment share of GDP.
E) All of these

Question 30

Which of the following is an element of a good institution?

A) High corruption.
B) Strong redtape.
C) Strong democracy.
D) A large government size.
E) A closed economy.

Question 31

All of the following are found to promote economic growth EXCEPT

A) high corruption.
B) democracy.
C) enforcement of property rights.
D) protection of patents and copyrights.
E) good navigation systems.

Question 32

According to economist Daron Acemoglu, well-functioning institutions are a fundamental cause of economic growth.

Question 33

According to economist Daron Acemoglu, all of the following are fundamental causes of economic growth EXCEPT

A) technology.
B) the legal system.
C) property rights.
D) geography.
E) openness to trade.

Question 34

Diminishing returns explain why labor and capital alone cannot account for the phenomenal growth in productivity during the last 200 years.

Question 35

According to economist Daron Acemoglu, physical capital accumulation is

A) a proximate cause of economic growth.
B) a fundamental cause of economic growth
C) not related to economic growth.
D) an effect instead of a cause of economic growth.
E) the only cause of economic growth.

Question 36

Given the same amount of natural resources, which of the following conditions leads to a higher rate of economic growth?

A) A command and control economy.
B) A corrupt government.
C) A country in civil war.
D) An economy open to foreign immigration and capital.
E) A landlocked country.

Question 37

Increasing the stock of capital enables more output to be produced.

Question 38

According to economist Daron Acemoglu, nature can never be a fundamental cause of economic growth.

Question 39

High corruption and a lack of copyright protection help capital accumulation and economic growth.

Question 40

How does the theory of economic growth change when capital is added as a factor of production?

Question 41

Productivity, defined as real GDP per hour worked, increases if

A) All of these
B) new technologies are continuously discovered.
C) saving and investment cause an increase in the quantity of capital per worker.
D) the average educational level of the work force increases.
E) new knowledge is applied in production.

Question 42

Which of the following best describes what occurs when time and resources are allocated to educate and train the labor force?

A) Human capital is produced.
B) Increased specialization is enabled.
C) Firms will be reorganized.
D) There will be more inventions.
E) There is learning by doing.

Question 43

Learning by doing represents a situation in which workers become more proficient by doing a particular task repeatedly.

Question 44

When wages increase, there are likely to be more labor-saving technological changes.

Question 45

Innovation can best be thought of as

A) another word for invention.
B) what occurs when new capital equipment is used.
C) the discovery of a new principle.
D) what occurs when new knowledge is applied in production.
E) what happens when a new business is started.

Question 46

Technology can best be thought of as

A) any type of capital equipment.
B) recipes that show how to combine inputs.
C) scientific process.
D) what inventors produce.
E) physical equipment.

Question 47

The decision to invest in human capital is influenced by considerations similar to those that motivate a firm to invest in physical capital. Therefore, if interest rates rise, fewer people will tend to invest in college education, since this is an investment that commonly involves borrowing money to afford tuition.

Question 48

The situation in which workers become more proficient by doing a particular task many times is known by economists as

A) learning by doing.
B) marginal productivity gains.
C) repetitive human capital.
D) revolving learning.
E) None of these

Question 49

The term that best describes what happens when fewer workers are needed to produce the same amount of output with the same amount of capital is

A) invention.
B) creative destruction.
C) labor-saving technological change.
D) diffusion.
E) capital-saving technological change.

Question 50

Technology is

A) anything that will enable a given amount of capital and labor to produce more output.
B) another name for capital.
C) another name for productivity.
D) any type of invention.
E) the application of science to production.

Question 51

Which part of technological change best refers to how technology affects growth throughout the economy?

A) The spread of the discovery of new knowledge
B) The spread of the application of new knowledge
C) The discovery of new knowledge
D) The accumulation of scientific knowledge
E) The application of new knowledge

Question 52

Which of the following statements is true?

A) The technology supply responds to market conditions.
B) Human capital has no role in research and development.
C) Attempts to bring about technological change via research and development are often tried but are usually not successful.
D) Technological change occurs at a constant rate.
E) Industries that attempt to produce new technologies face very little risk.

Question 53

All inventions result in innovations.

Question 54

Equipping cars with a navigational system that uses global positioning systems is best described as an example of

A) an invention.
B) innovation.
C) learning by doing.
D) diffusion.
E) specialization.

Question 55

Requiring workers to work on weekends and holidays is an example of

A) labor-saving technological change.
B) creative destruction.
C) capital-saving technological change.
D) an invention.
E) diffusion.

Question 56

Suppose a worker at a computer company rearranges existing machines and labor and increases production in the process. Using the production function, with output on the vertical axis and labor on the horizontal axis, this would be described as

A) an upward shift of the curve combined with an upward movement along the curve.
B) a movement upward along the curve.
C) a movement downward along the curve.
D) a downward shift of the curve.
E) an upward shift of the curve.

Question 57

Economists commonly refer to a person's accumulated knowledge and skills as

A) relevant accumulated productivity.
B) human capital.
C) the knowledge productivity base.
D) internal capital.
E) robotic capital.

Question 58

Human capital is an input into technology production.

Question 59

Innovations apply only to new types of capital.

Question 60

The education and training of workers is referred to as learning by doing.

Question 61

A sporting event is an example of a good that is

A) rivalrous and excludable.
B) nonrivalrous and excludable.
C) rivalrous and nonexcludable.
D) nonrivalrous and nonexcludable.
E) neither rivalrous nor nonrivalrous.

Question 62

Intellectual property laws arise as a result of

A) diffusion.
B) learning by doing.
C) nonexcludability.
D) human capital formation.
E) nonrivalry.

Question 63

If the owner of a type of technology is able to successfully preclude others from using the good, this type of technology could be classified as a(n)

A) nonexcludable good.
B) excludable good.
C) rival good.
D) normal good.
E) nontradable good.

Question 64

Because investors often cannot be fully compensated for the benefits their ideas provide to others, they may produce too little technology. Thus, there is a potential role for government in providing funds for research and development, both in industry and in universities.

Question 65

Because technology exhibits nonrivalry and nonexcludability, there will likely be

A) learning by doing.
B) an underproduction of technology.
C) specialization.
D) an overproduction of technology.
E) human capital development.

Question 66

Public radio is an example of a good that is

A) rivalrous and excludable.
B) nonrivalrous and excludable.
C) rivalrous and nonexcludable.
D) nonrivalrous and nonexcludable.
E) neither rivalrous nor nonrivalrous.

Question 67

Explain how each of the following can be thought of as technological change, or if it cannot be thought of as technological change, explain why not.
(A)The introduction of a night shift
(B)An increase in the educational level of the population
(C)Specialization within a business
(D)A new invention that will make computers faster

Question 68

A cell phone is an example of a good that is

A) rivalrous and excludable.
B) nonrivalrous and excludable.
C) rivalrous and nonexcludable.
D) nonrivalrous and nonexcludable.
E) neither rivalrous nor nonrivalrous.

Question 69

Why is learning by doing a type of technical progress?

Question 70

Equipping lawn mowers with internal combustion engines is an example of

A) technology spillovers.
B) learning by doing.
C) specialization.
D) the nonrivalrous nature of technology.
E) the rivalrous nature of technology.

Question 71

Which of the following could the government do to increase the incentive for individuals and firms to engage in R&D?

A) The government could eliminate any private gain arising from the R&D endeavor.
B) The government could design incentives that will increase the private gain from an R&D endeavor.
C) The government could ensure that there will be social gains from the activity.
D) There is no role for government.
E) The government should make itself the sole beneficiary of the result's proceeds.

Question 72

Which of the following is not a characteristic of technology?

A) It requires trademarks and copyrights in order for those developing it to be compensated.
B) It is possible for more than one person to use the good at the same time.
C) It is easy to preclude others from using it.
D) It is difficult to preclude others from using the good.
E) Its supply depends on the cost of producing it.

Question 73

Nonrivalry means that

A) the owner of a good cannot prevent others from using the good.
B) the use of a good by one individual does not preclude its use by others at the same time.
C) a good cannot be exchanged in a market transaction.
D) a good can be exchanged in a market transaction.
E) a produced good will not be profitable.

Question 74

The more excludable an innovation is, the less chance of a spillover.

Question 75

A teacher develops a new hypermedia program for learning economics. How does this illustrate the concepts of invention, innovation, and diffusion?

Question 76

A shady bench on a hot day at a public park is an example of a good that is

A) rivalrous and excludable.
B) nonrivalrous and excludable.
C) rivalrous and nonexcludable.
D) nonrivalrous and nonexcludable.
E) neither rivalrous nor nonrivalrous.

Question 77

A copyright will enable a good to become more rivalrous in nature.

Question 78

For an entrepreneur to profit from an innovation,

A) the innovation, when viewed as a commodity, needs to be highly rivalrous in nature.
B) it should be undesirable and unfeasible for excludability to exist.
C) the innovation, when viewed as a commodity, needs to be highly nonrivalrous in nature.
D) the innovation needs to be both highly nonexcludable and highly nonrivalrous.
E) the innovation needs to be excludable.

Question 79

The person who figured out that it is best to keep the milk, bread, and eggs at the back of the grocery store and not at the front probably did not profit as much from this idea as the grocery industry as a whole did. This is because

A) the concept didn't work.
B) the concept was highly nonexcludable.
C) that person's idea was not an innovation.
D) the concept was not a commodity.
E) the concept was nonrivalrous.

Question 80

Society usually benefits more from an innovation than the person who develops it.