Deck 6: Growth and Ideas

Question 1

The difference between total factor productivity (TFP)and the stock of ideas is that:

A)TFP grows and ideas are fixed.
B)TFP is fixed and ideas can grow.
C)TFP is nonrivalrous and ideas are not.
D)TFP is rivalrous and ideas are not.
E)There is no difference.

Answer 1

B

Question 2

In perfect competition,the price __________;and in a monopoly,the price __________.

A)is zero;is positive
B)is greater than the marginal cost;is equal to the marginal cost
C)is less than the marginal cost;is greater than the marginal cost
D)is equal to the marginal cost;is greater than the marginal cost
E)is positive;is zero

Answer 2

D

Question 3

To get increasing returns to scale using the production function
,we need to replace total factor productivity,
,

A)with more capital.
B)with the flow of ideas, .
C)with the stock of ideas, .
D)with the number 2.
E)with twice the factor productivity, .

Answer 3

C

Question 4

In economics,a nonrival good is one that:

A)cannot be consumed by more than one person at a time.
B)can be consumed by more than one person at a time.
C)can be consumed by more than one person at a time but is congested.
D)cannot be consumed by more than two persons at a time.
E)none of the above

Question 5

If Y is a good's output,X is spending to produce a good,
Is the fixed cost associated with production,and C is the average cost of production,which of the following production functions exhibits increasing returns?

A)
B)
C)
D)
E)

Question 6

The markup is defined as:

A)the percentage of the price above the marginal cost that is used to recoup the costs of generating ideas.
B)the percentage of the price below the marginal cost that is used to recoup the costs of generating ideas.
C)the percentage of the price above the average cost that is used to recoup variable costs.
D)the percentage of the cost above the marginal cost that is used to recoup the revenues of generating ideas.
E)the percentage of the price below the marginal cost that is used to recoup the profits of generating ideas.

Question 7

In economics,a rival good is one that:

A)cannot be consumed by more than two persons at a time.
B)can be consumed by more than one person at a time.
C)can be consumed by more than one person at a time but is congested.
D)cannot be consumed by more than one person at a time.
E)none of the above

Question 8

Which of the following are nonrival goods?

A)a TV signal
B)a blueprint
C)national defense
D)a dam
E)all of the above

Question 9

Because,in many industries,the cost of generating new ideas is so high,firms must:

A)charge a price equal to the marginal cost.
B)charge a price higher than the marginal cost.
C)charge a price lower than the marginal cost.
D)charge a price equal to the average fixed cost.
E)charge a price lower than the average fixed cost.

Question 10

If there are large fixed costs,due to research and development,perfect competition does not generate new ideas,because:

A)firms need to recoup these costs through higher profits.
B)with monopolistic competition,prices are equal to the marginal cost plus a markup.
C)with monopolistic competition,prices are equal to the marginal cost minus a markup.
D)perfectly competitive firms always set prices lower than the marginal cost.
E)Both a and b are correct.

Question 11

Which of the following are (an)example(s)of idea(s)?

A)new irrigation techniques
B)turning sand into computer chips
C)the assembly line
D)steam engine
E)all of the above

Question 12

With the production function
,if we double __________,we have a constant returns production.

A)capital
B)capital,labor,and the stock of ideas
C)capital and the stock of ideas
D)capital and labor
E)labor and the stock of ideas

Question 13

The production function
,where
Is the stock of ideas,
Is capital,and
Is labor,assumes:

A) is rivalrous.
B) is nonrivalrous.
C) is nonrivalrous.
D) is rivalrous.
E) is fixed.

Question 14

Increasing returns to scale is characterized by:

A)constantly declining fixed costs.
B)diseconomies of scale;that is,the average cost falls as output rises.
C)economies of scale;that is,the average cost rises as output rises.
D)diseconomies of scale;that is,the average cost is constant as output rises.
E)economies of scale;that is,the average cost falls as output rises.

Question 15

With the production function
,if we double __________,we have an increasing returns production.

A)capital
B)capital and the stock of ideas
C)capital and labor
D)capital,labor,and the stock of ideas
E)labor and the stock of ideas

Question 16

Which of the following flowcharts best summarizes Romer's description of ideas and growth?

A)Ideas $\to$ Nonrivalry $\to$ Increasing returns $\to$ Imperfect competition
B)Ideas $\to$ Capital $\to$ Constant returns $\to$ Imperfect competition
C)Capital $\to$ Rivalry $\to$ Increasing returns $\to$ Perfect competition
D)Ideas $\to$ Rivalry $\to$ Increasing returns $\to$ Perfect competition
E)Capital $\to$ Nonrivalry $\to$ Decreasing returns $\to$ Imperfect competition

Question 17

In Romer's influential paper he divided the economic world into:

A)resources and ideas.
B)objects and resources.
C)objects and ideas.
D)utilities and objects.
E)none of the above

Question 18

The amount of raw material in the universe-the amount of sand,oil,and the number of atoms of carbon,oxygen,etc.-is __________.The number of ways of arranging and using these raw materials is __________.

A)finite;also finite
B)infinite;virtually infinite
C)finite;virtually infinite
D)virtually infinite;zero
E)zero;infinite

Question 19

If there are large fixed or research and development costs,such as in the pharmaceutical industry,production can characterized by:

A)negative costs.
B)constant returns to scale.
C)decreasing returns to scale.
D)large variable costs.
E)increasing returns to scale.

Question 20

Which of the following are nonrival goods?

A)a peanut butter sandwich
B)orange juice
C)a jacket
D)all of the above
E)none of the above

Question 21

Suppose the parameters of the Romer model take the following values:
,
,
,and
)What is the growth rate of this country?

A)10 percent
B)40 percent
C)0.02 percent
D)2 percent
E)0.10 percent

Question 22

In the Romer model,the ideas production function is given by:

A) .
B) .
C) .
D) .
E) .

Question 23

Suppose the parameters of the Romer model take the following values:
,

,and
)What is the growth rate of this country?

A)2 percent
B)20 percent
C)0.2 percent
D)10 percent
E)0.01 percent

Question 24

The production function in the Romer model is given by __________,where
Is __________.

A) ;the growth rate of capital
B) ;the growth rate of knowledge
C) ;the growth rate of population
D) ;the growth rate of knowledge
E) ;the growth rate of population

Question 25

In the Romer model,if an economy allocates all of its labor to production,

A)it will reduce output.
B)it will reduce the number of ideas it generates.
C)it will increase the number of ideas it generates.
D)it will not generate any ideas.
E)None of the above is correct.

Question 26

The production of new ideas in the Romer model is:

A)increasing in the efficiency of creating knowledge and the fraction of labor in research and development.
B)decreasing in the efficiency of creating knowledge and increasing the fraction of labor in research and development.
C)increasing in the efficiency of creating knowledge and decreasing in the fraction of labor in research and development.
D)increasing in the population growth and capital accumulation.
E)decreasing in the efficiency of creating knowledge and in the fraction of labor in research and development.

Question 27

With monopolistic pricing,__________ are needed to generate __________.

A)profits;capital
B)costs;capital
C)profits;new ideas
D)variable costs;total factor productivity
E)profits;total factor productivity

Question 28

In the Romer model,output is increasing in __________ and decreasing in __________.

A)the saving rate;the depreciation rate
B)the research share;the growth rate of knowledge
C)the growth rate of knowledge;the fraction of population in the ideas sector
D)the growth rate of knowledge;the depreciation rate
E)the saving rate;the growth rate of knowledge

Question 29

In the knowledge production function
Represents:

A)labor efficiency.
B)the cost of producing new ideas.
C)the marginal cost of labor.
D)how good an economy is at generating knowledge.
E)labor's wage.

Question 30

Which of the following can be used to give firms incentive to innovate?

A)patents
B)copyrights
C)trade secrets
D)higher taxes
E)a,b,and c

Question 31

If Canada and Taiwan have the same fraction of researchers and the same knowledge efficiency parameter,but Canada's population is larger,then:

A)Taiwan has a higher per capita output growth rate.
B)Canada has a higher per capita output growth rate.
C)each country's per capita output grows at the same rate.
D)Canada has higher per capita income than Taiwan.
E)Canada's level of income is greater than Taiwan's.

Question 32

In the Romer model,the more labor you dedicate to generating ideas __________ but __________.

A)the faster you accumulate knowledge;at a loss to current output in the consumption sector
B)the faster you accumulate knowledge;at a gain to current output in the consumption sector
C)the slower you accumulate knowledge;at a loss to current output in the consumption sector
D)you do not accumulate knowledge;at a gain to current output in the consumption sector
E)the more knowledge you lose;at a gain to current output in the consumption sector

Question 33

In the Romer model,what two key goods are produced?

A)a government good and new ideas
B)a consumption good and new ideas
C)a consumption good and total factor productivity
D)a consumption good and capital
E)none of the above

Question 34

In the Romer model,the growth rate of ideas,
,is increasing in:

A)the research share and the total population.
B)the knowledge efficiency parameter and the research share.
C)the knowledge efficiency parameter,the research share,and the total population.
D)the knowledge efficiency parameter and the saving rate.
E)the fraction of labor in research and development and the savings rate.

Question 35

Suppose the parameters of the Romer model take the following values:
,
,
,and
)What is the number of researchers in this country?

A)20
B)1 million
C)100
D)0.10
E)200

Question 36

Which of the following can be used to give firms incentive to innovate?

A)patents
B)copyrights
C)prizes
D)subsidies
E)all of the above

Question 37

In the Romer model,the production function
,where
Is knowledge and
Is the amount of labor in the output sector,

A)exhibits constant returns to labor and increasing returns to labor and knowledge.
B)exhibits constant returns to labor and increasing returns to knowledge.
C)exhibits increasing returns to labor and constant returns to labor and knowledge.
D)exhibits decreasing returns to labor and constant returns to labor and knowledge.
E)exhibits increasing returns to labor and increasing returns to labor and knowledge.

Question 38

The president of Tunisia asks you to suggest an idea to improve the economy's growth without worrying about decreasing returns.You suggest:

A)paying a competitive wage.
B)offering firms an incentive to produce new ideas.
C)placing a higher tax on firms.
D)removing legal protection for firms.
E)none of the above

Question 39

In the Romer model,the inputs to production are

A)capital and labor.
B)capital and ideas.
C)labor and ideas.
D)natural resources,labor,and ideas.
E)labor and total factor productivity.

Question 40

The reason perfect competition cannot generate new ideas is that:

A)profits are positive.
B)perfectly competitive firms have no ideas.
C)profits are zero.
D)firms are too small to generate ideas.
E)revenues are positive.

Question 41

In the Romer model in Figure 6.1,at time t0,a change in the growth rate of per capita output can be explained by:

A)an increase in the ideas efficiency parameter.
B)an increase in the population.
C)an increase in the research share.
D)an increase in the saving rate.
E)a and b

Question 42

Nonrivalry in the knowledge sector means that:

A)per capita income depends on the total population.
B)per capita income depends on some of the stock of ideas.
C)per capita income depends on the total stock of ideas.
D)labor in the ideas sector also can be used in the output sector.
E)all labor is used in the ideas sector.

Question 43

Suppose the parameters of the Romer model take the following values:
,
,
,and
)What is the per capita income of this country in the initial period,
?

A)about 12.1
B)about 11.9
C)about 12.0
D)about 1.19
E)about 9.9

Question 44

Suppose the parameters of the Romer model take the following values:
,
,
,and
)What is the per capita income of this country in the first period,
?

A)about 1.19
B)about 11.9
C)about 12.0
D)about 14.3
E)about 9.9

Question 45

Idea accumulation in the Romer model exhibits:

A)increasing returns to capital.
B)diminishing returns in the stock of ideas.
C)negative returns in the stock of ideas.
D)no diminishing returns in the stock of ideas.
E)diminishing returns to labor.

Question 46

Suppose the parameters of the Romer model take the following values:
,
,
,and
)What is the per capita income of this country in the tenth period,
?

A)about 6.13
B)about 61.3
C)about 12.0
D)about 11.9
E)about 10.9

Question 47

In the Romer model,if an economy's population increases,

A)output growth decelerates.
B)output immediately increases and output growth slows.
C)output immediately decreases and output growth slows.
D)output immediately decreases and output growth accelerates.
E)output growth accelerates.

Question 48

Suppose the Romer model parameters in East Timor are
,
,
,and
;while in North Timor they are
,
,
,and
;then:

A)neither country grows.
B)East Timor's per capita income growth rate is 20 percent and North Timor's is 1 percent.
C)East Timor's per capita income growth rate is 5 percent and North Timor's is 0.05 percent.
D)East Timor's per capita income growth rate is 100 percent and North Timor's is 1 percent.
E)each country's per capita income growth rate is 20 percent.

Question 49

If there are decreasing returns to the ideas stock in the knowledge sector,

A)the Romer model cannot explain sustained growth.
B)the Romer model can explain an economy that reaches its steady state.
C)the Romer model can explain sustained growth.
D)the Romer model cannot explain why economies' saving rates differ.
E)the Romer model cannot explain why the output sector exhibits decreasing returns.

Question 50

In the Romer model,the Mexican economy:

A)never generates new ideas.
B)does not need to generate ideas,as it can use those devised in the United States.
C)cannot use ideas devised in the United States.
D)eventually will reach a steady state.
E)does not have an ideas sector.

Question 51

If East and West Timor are identical in every way except that East Timor has fewer researchers,

A)West and East Timor will grow at the same rate.
B)East Timor should grow faster according to the Romer model.
C)West Timor should grow faster according to the Solow model.
D)West Timor should grow faster according to the Romer model.
E)East Timor is smaller than West Timor.

Question 52

In the Romer model,if an economy's research share decreases,there will be:

A)an immediate decrease in output and output growth slows.
B)an immediate increase in output and output growth slows.
C)an immediate increase in output and output growth accelerates.
D)an immediate decrease in output and output growth accelerates.
E)no change in output but output growth slows.

Question 53

Because there are no diminishing returns in the stock of ideas in the Romer model,

A)old ideas continue to contribute to current economic growth.
B)economic growth can be sustained forever.
C)the economy eventually reaches a steady state.
D)economic growth eventually slows.
E)a and b

Question 54

In the ideas sector production function,
There are:

A)increasing returns to the ideas stock but decreasing returns overall.
B)decreasing returns to the ideas stock but increasing returns overall.
C)decreasing returns to the ideas stock and labor.
D)increasing returns to the ideas stock and labor.
E)none of the above

Question 55

In the Romer model in Figure 6.2,at time t0,a change in the shape of the production function can be explained by:

A)an increase in the population.
B)an increase in the research share.
C)an increase in the ideas efficiency parameter.
D)an increase in the saving rate.
E)a and b

Question 56

In the Romer model,__________ is the driving force behind sustained __________ economic growth.

A)labor;long-term
B)knowledge;short-term
C)knowledge;long-term
D)capital;short-term
E)capital;long-term

Question 57

In the Romer model with decreasing returns to the knowledge sector,

A)the transition dynamics appear very similar to those in the Solow model.
B)an increase in the research share increases the growth rate in the short run.
C)an increase in the research share increases the growth rate in the short and long runs.
D)a decrease in the research share increases the growth rate in the short run.
E)Both a and b are correct.

Question 58

A balanced growth path is defined as a situation in which:

A)the output growth rate is constant.
B)the growth rates of all endogenous variables are variable.
C)the growth rates of some of the endogenous variables are constant.
D)the growth rates of all endogenous variables are constant.
E)All of the above are correct.

Question 59

The parameter(s)in the Romer model is(are):

A)the initial stock of ideas,the population,the fraction of population in the ideas sector,and the ideas efficiency parameter.
B)the ideas efficiency parameter.
C)the fraction of population in the ideas sector and the ideas efficiency parameter.
D)the initial capital stock and the fraction of population in the ideas sector.
E)the initial capital stock and the ideas efficiency parameter.

Question 60

Nonrivalry in the Romer model means that ideas created:

A)can benefit only similar economies.
B)can benefit only a few economies across the world.
C)can be used only in the economy that devised them.
D)can benefit virtually all economies across the world.
E)do none of the above.

Question 61

In the combined Solow-Romer model,long-run growth is sustained because of:

A)population growth.
B)capital accumulation.
C)the nonrivalry of ideas.
D)total factor productivity.
E)no capital depreciation.

Question 62

New irrigation techniques are examples of idea(s).

Question 63

Defining the growth of variable zt as gz,in the combined Solow-Romer model,the growth rate of total output,using the production function
Is given as:

A) .
B) .
C) .
D) .
E) .

Question 64

Defining the growth of variable zt as gz,in the combined Solow-Romer model,the growth rate of total output,using the standard production function,is given as:

A) .
B)
C) .
D) .
E) .

Question 65

In the Romer model with decreasing returns to the knowledge sector,

A)the number of researchers is irrelevant to long-term per capita income.
B)more researchers produce more ideas,raising the long-run growth rate of per capita income.
C)more researchers produce fewer ideas,raising the long-run growth rate of per capita income.
D)more researchers produce more ideas,raising the long-run level of per capita income.
E)more researchers cause the knowledge stock to contract.

Question 66

According to the combined Solow-Romer model,

A)all countries grow at the same rate in the long run,but actual growth rates can differ across countries for long periods of time.
B)all countries grow at the same rate in the medium and long runs.
C)all countries grow at different rates forever.
D)all countries grow at the same rate as the United States in each period.
E)all countries grow at different rates in the long run,but actual growth rates are the same across countries for long periods of time.

Question 67

In growth accounting,the residual,gA,is so named because:

A)the economy is complicated.
B)economists know exactly what contributes to growth.
C)it is a way to measure observed TFP growth.
D)it is a way to measure unobserved TFP growth.
E)it measures labor composition.

Question 68

The number of ideas is finite.

Question 69

For the years 1987-2005,output per person in the private sector grew 2.3 percent;capital intensity grew 0.9 percent;and total factor productivity grew 1.1 percent.What was the growth rate of labor composition?

A)1.2 percent
B)2.0 percent
C)0.4 percent
D)4.3 percent
E)Not enough information is given.

Question 70

In the combined Solow-Romer model,the total output growth rate:

A)equals the growth rate of ideas.
B)is greater than the growth rate of ideas.
C)is lower than the growth rate of ideas.
D)equals the rate of capital depreciation.
E)is greater than the population growth rate.

Question 71

The signals of the TV show House are a rival good.

Question 72

In the combined Solow-Romer model,an exogenous increase in the saving rate:

A)immediately increases the growth rate of per capita output,which eventually slows to its previous rate.
B)immediately decreases the per capita output,but the growth rate does not change.
C)increases the growth rate of per capita income,but eventually the economy reaches a new steady-state level of per capita output.
D)immediately decreases the growth rate of per capita output,which eventually accelerates to a higher rate.
E)has no impact on the growth rate or level of per capita output.

Question 73

In the combined Solow-Romer model,the total output growth rate is greater than in the Romer model because:

A)the saving rate is higher.
B)of population growth.
C)capital depreciation is zero.
D)of capital accumulation.
E)of a greater research share.

Question 74

In growth accounting,if we subtract the capital intensity growth rate and the labor composition growth rate from the growth rate of output per person,we have:

A)the growth rate of total factor productivity.
B)the residual.
C)capital accumulation.
D)savings.
E)Both a and b are correct.

Question 75

The "idea" of the assembly line leads to increasing returns.

Question 76

Labor composition is used in "growth accounting" because:

A)it includes total number of hours worked.
B)it can include changes in the age distribution of the labor force.
C)it can include the educational attainment in the labor force.
D)it measures how effective capital is per worker.
E)a and b

Question 77

In the growth accounting equation,
Where
Is the growth rate of variable
,B represents __________,while C is called __________.

A)labor composition;capital accumulation
B)the contribution from capital;the (Solow)residual
C)labor composition;the (Solow)residual
D)educational attainment;labor composition
E)none of the above

Question 78

"Growth accounting" endeavors to:

A)measure GDP.
B)measure economic growth rates.
C)determine how capital accumulates.
D)measure what factors,and in what proportion,affect overall economic growth.
E)measure global output and the proportion of global output attributed to each country.

Question 79

In the combined Solow-Romer model,an exogenous increase in the saving rate:

A)pushes the economy to a lower per capita output balanced growth path.
B)pushes the economy to a higher per capita output balanced growth path.
C)pushes the economy's growth rate of per capita output to infinity.
D)pushes the economy to a new steady-state level of per capita output.
E)has no impact on the growth rate or level of per capita output.

Question 80

For the years 2004-2005,output per person in the private sector grew 2.1 percent;capital intensity grew 0.3 percent;and labor composition grew 0.1 percent.What was the growth rate of total factor productivity?

A)1.8 percent
B)2.5 percent
C)1.7 percent
D)0.4 percent
E)Not enough information is given.