Deck 12: Firms in Perfectly Competitive Markets

Question 1

As economic growth rises, literacy rates tend to fall.

Answer 1

False

Question 2

Economists generally define economic growth as an increase in real income per capita.

Answer 2

True

Question 3

The higher opportunity cost of obtaining an education in developing countries is one of the reasons that school enrollments are lower.

Answer 3

True

Question 4

Economies of large-scale production may exist in some forms of production, so larger markets associated with greater populations can lead to more efficiently sized production units.

Question 5

Hong Kong and Japan have achieved relatively high incomes per capita despite lacking an abundance of natural resources.

Question 6

Free trade can promote greater output because of the principle of comparative advantage.

Question 7

As savings grow in an economy, economic growth rises.

Question 8

Increases in the quality and quantity of an economy's resources have little effect on its potential output in the long run.

Question 9

Thomas Malthus's predictions did not come to pass because he implicitly assumed that there would be no technological advances and did not foresee that agricultural land was not completely fixed in quantity or quality.

Question 10

In developing countries, the opportunity cost of an education is relatively low compared to the cost in a highly developed country.

Question 11

Thomas Malthus believed that in the long run, the growth rates of real GDP would not exceed population growth.

Question 12

Brazil has a relatively low income per capita because it has relatively few natural resources.

Question 13

Capital formation is a key component of economic growth.

Question 14

Ultimately, productivity growth is the major determinant of a country's standard of living

Question 15

It is impossible to have economic growth unless a country or a region has abundant natural resources to sustain the growth.

Question 16

Higher rates of real economic growth can allow a less-developed, low per capita income country to attain the same standard of living as a more developed, high per capita income country in a few years.

Question 17

If the educational attainment of a nation's population increases, the economy's production possibilities curve shifts inward.

Question 18

An increase in the quantity of labor inputs always leads to economic growth.

Question 19

Economists generally define economic growth as an increase in the nominal income of the population.

Question 20

Generally there is an inverse relationship between the level of savings and the level of long-term economic growth.

Question 21

Which of the following did not result in economic growth?

A)​Installing a network of irrigation ditches and pumping stations in order to grow fruits and vegetables in parts of southern California
B)​Cyrus McCormack inventing a threshing machine for harvesting grains
C)​After World War II, the U.S.instituting the GI bill, which provided education subsidies to soldiers being released from service duty
D)​Many citizens emigrating from a nation when a politically repressive regime takes office

Question 22

The prosperity of a nation today is typically measured by its:

A)​total output or gross national product.
B)​real output per capita.
C)​gold reserves.
D)​proportionate share of international trade.

Question 23

Real output per capita:

A)​is measured by real GDP per capita.
B)​is total real output ( real GDP) divided by the number of persons among whom it will be distributed.
C)​is one measure of the average level of economic well being in a country.
D)​all of the above are correct.

Question 24

In any country, the population will generally be better off as long as the ____ over time and population ____.

A)​quantity and quality of output decreases; does not increase faster than real output
B)​quantity and quality of output increases; increases faster than real output
C)​quantity and quality of output increases; does not increase faster than real output
D)​technology improves; increases faster than real output

Question 25

A technological advance may come in either the form of a product or a process innovation.

Question 26

The measure most commonly used by economists to gauge the standard of living of a nation is:

A)​labor productivity.
B)​nominal GDP.
C)​real GDP.
D)​real GDP per capita.

Question 27

Given a constant rate of growth of real GDP, what would lead to an increasing real GDP per capita?

A)​a rate of population growth that is less than the rate of growth of real GDP
B)​a rate of population growth that is greater than the rate of growth of real GDP
C)​an increase in the size of the labor force
D)​an increase in the capital stock

Question 28

Foreign direct investment-capital injections from abroad-can promote economic growth.

Question 29

If real GDP per capita is increasing, real output is:

A)​growing less rapidly than the population.
B)​growing more rapidly than the population.
C)​growing at the same rate as the population.
D)​growing more rapidly than are prices.

Question 30

Economic growth is measured by the:

A)​advancement in the quality of a nation's technology.
B)​rate of business investment and capital formation.
C)​annual percentage change in per capita real output of goods and services.
D)​marginal change in nominal output divided by total output from the previous year.

Question 31

Given a constant rate of growth of real GDP, what would cause a fall in real GDP per capita?

A)​a rate of population growth that is less than the rate of growth of real GDP
B)​a rate of population growth that is greater than the rate of growth of real GDP
C)​an increase in the size of the labor force
D)​an overall decrease in population

Question 32

Which one of the following will not cause the production possibilities curve to shift outward?

A)​improvements in the stock of land
B)​increased educational opportunities
C)​a very low birth rate
D)​increased entrepreneurial activity

Question 33

An increase in the stock of capital:

A)​causes a movement from a point on an economy's production possibilities curve to a point inside the curve.
B)​causes an economy's production possibilities curve to shift inward over time.
C)​causes an economy's production possibilities curve to shift outward over time.
D)​has no effect on the position of an economy's production possibilities curve over time.

Question 34

When measuring economic growth, economists typically focus on per capita real GDP in order to account for variations in the:

A)​size of the population
B)​price level
C)​quality of goods and services
D)​both (a) and (b) above

Question 35

How much a country's economy will produce at its potential output is also called:

A)​the trough of the business cycle.
B)​its economic welfare.
C)​the trend line.
D)​the natural rate of output.

Question 36

If real GDP is increasing more rapidly than the population, then:

A)​interest rates must be falling.
B)​the economy must be experiencing inflation.
C)​per capita real GDP will be increasing.
D)​per capita real GDP will be decreasing.

Question 37

Which of the following statements is not correct?

A)​Economic growth is best measured by the annual percentage change in nominal GDP per capita.
B)​An economy producing along the production possibilities curve is operating at its potential output.
C)​Economic growth is a crucial determinant of people's well-being.
D)​If the quality of labor improves, an economy's production possibilities curve will shift outward.

Question 38

Which of the following affects the rate of economic growth?

A)​the quality of available resources.
B)​the quantity of available resources.
C)​technological change.
D)​all of the above.

Question 39

If real GDP per capita is decreasing, real output is:

A)​growing less rapidly than the population.
B)​growing more rapidly than the population.
C)​growing at the same rate as the population.
D)​growing more rapidly than are prices.

Question 40

Improvements in and greater stocks of land, labor, capital, and entrepreneurial activity will shift the production possibilities curve:

A)​outward, such that more goods and services can be produced.
B)​outward, such that the cost-of-living rises.
C)​inward, such that the marketplace experiences a decrease in price and output levels.
D)​inward, because more resources will be used up and not renewed.

Question 41

Which of the following factors contribute to economic growth?

A)​a decline in the stock of physical capital
B)​the discovery of new oil reserves
C)​a decrease in the productivity of labor
D)​a decrease in the quantity of labor due to emigration

Question 42

A country will roughly double its GDP in five years if its annual growth rate is:

A)​5 percent.
B)​7 percent.
C)​12 percent.
D)​14 percent.

Question 43

The rule of 70 which predicts the time required for the economy of a nation to double, is based on the mechanism of:

A)​compound interest.
B)​capital formation.
C)​labor force productivity.
D)​capital investments.

Question 44

For a low-income country to develop into a high-income country, ____ is (are) needed.

A)​high rates of inflation
B)​high interest rates
C)​sustained economic growth
D)​restrictions on international trade

Question 45

Country A and Country B initially have the same real GDP per capita. Country A experiences no economic growth, while Country B grows at a sustained rate of 5 percent. In 14 years, Country A's GDP will be approximately ____ that of Country B.

A)​one-fourth
B)​one-half
C)​double
D)​triple

Question 46

Which of the following countries have a relative abundance of natural resources?

A)​Japan
B)​Canada
C)​Hong Kong
D)​all of the above

Question 47

The faster the rate of technological progress:

A)​the greater the rate of economic growth.
B)​the slower the rate of economic growth.
C)​the greater the rate of population growth.
D)​the slower the rate of growth of the money supply.

Question 48

In the long run, the most important source of increase in a nation's standard of living is a:

A)​zero rate of population growth.
B)​high rate of economic growth.
C)​high rate of consumption.
D)​high rate of labor force growth.

Question 49

For a low-income country to develop into a high-income country, ____ is (are) needed.

A)​a sustained and rapid expansion in the money supply
B)​sustained economic growth
C)​tax breaks on consumption goods
D)​deflation

Question 50

Which one of the following will cause the production possibilities curve to shift outward?

A)​improved public education
B)​improved health care systems
C)​larger budgets for research, development, and exploration
D)​all of the above

Question 51

The slower the rate of capital formation:

A)​the greater the rate of economic growth.
B)​the slower the rate of economic growth.
C)​the greater the rate of population growth.
D)​the slower the rate of growth of the money supply.

Question 52

A country will roughly double its GDP in twenty years if its annual growth rate is:

A)​2.5 percent.
B)​3.5 percent.
C)​7.5 percent.
D)​12 percent.

Question 53

Which of the following factors contribute to economic growth?

A)​growth in physical capital
B)​technological advances
C)​an increase in the productivity of labor
D)​all of the above

Question 54

Which of the following countries is lacking an abundance of natural resources?

A)​Australia
B)​Japan
C)​Brazil
D)​United States

Question 55

Which one of the following will determine the size of the production possibilities curve?

A)​amount of labor
B)​amount of capital
C)​entrepreneurship
D)​all of the above

Question 56

Which of the following factors contribute to economic growth?

A)​the construction of new factories
B)​an increase in the proportion of the population that is college-educated
C)​a decrease in the productivity of labor
D)​only (a) and (b).

Question 57

To achieve a high standard of living, a nation should:

A)​increase welfare payments to the poor.
B)​use less capital and more labor in the production process.
C)​promote economic growth.
D)​increase the tax deduction for child dependents.

Question 58

One of the most important determinants of accelerated economic growth is:

A)​relaxed property rights.
B)​an increase in population.
C)​a high level of savings.
D)​an increased rate of consumption.

Question 59

Which of the following is correct?

A)​An increase in the quantity of labor always leads to economic growth.
B)​Increased education adds to the stock of human capital, not unlike building factories adds to the stock of physical capital.
C)​A decrease in the productivity of labor leads to economic growth.
D)​Japan and Hong Kong are rich in natural resources.

Question 60

The ____ shows roughly how long it will take a nation to double its output at various growth rates.

A)​rule of rapid growth
B)​rule of 70
C)​rule of 1950
D)​duopoly rule

Question 61

When observing economic growth and literacy rates, it is clear that:

A)​economic growth causes higher literacy rates.
B)​economic growth may be a consequence of improved education.
C)​improved levels of education may be the result of increasing economic growth.
D)​all of the above are likely to be true.

Question 62

Which of the following is not considered a factor contributing to economic growth?

A)​Growth in the quantity and quality of labor resources used
B)​Growth in physical capital inputs (machines, tools, buildings, and inventories)
C)​Growth in the money supply relative to the growth of final goods and services
D)​Government protection of property rights

Question 63

New growth theorists believe that increased economic growth is primarily driven by:

A)​higher level of savings.
B)​higher level of capital investments.
C)​increased foreign investment.
D)​technological innovation and ideas.

Question 64

Which of the government policies below is not likely to encourage per capita economic growth?

A)​High taxes on companies that spend a lot on capital formation
B)​The use of tax revenues for investment and capital formation
C)​Special subsidies for capital-intensive forms of production
D)​Promotion of education and training programs for workers

Question 65

When an economy experiences significant economic growth:

A)​a negative relationship exists between output per capita and adult literacy rates.
B)​an indirect relationship exists between output per capita and adult literacy rates.
C)​a direct relationship exists between output per capita and adult literacy rates.
D)​no observed relationship exists between output per capita and adult literacy rates.

Question 66

As more capital per worker is added, a per worker production function generally becomes:

A)​flatter because capital is subject to diminishing marginal returns.
B)​flatter because labor is subject to diminishing marginal returns.
C)​flatter because capital is subject to increasing marginal returns.
D)​steeper because capital is subject to diminishing marginal returns.

Question 67

Which of the following is not considered a factor that contributes to economic growth?

A)​increased labor productivity
B)​increased infant mortality rates
C)​technological advances
D)​the migration of resources from areas of low productivity to areas of high productivity

Question 68

Would companies and individuals invest as much in significant research and development if a system of patents were not available?

A)​Yes they would, because they could still hope to monopolize the market.
B)​Yes they would, because firms are civic-minded and highly motivated to introduce innovations that improve the standard of living.
C)​No they would not, because if they made a significant investment in the development, they would be unable to protect the innovations or discoveries long enough to be sufficiently compensated for their efforts.
D)​No they would not, because the benefits to society of engaging in research and development would be less than the costs to society.

Question 69

In countries with low levels of income:

A)​the opportunity cost of an education is higher than in high-income countries.
B)​illiteracy rates are higher than in high-income countries.
C)​economies are primarily agricultural-based.
D)​all of the above tend to be true.

Question 70

If productivity of an economy increases then:

A)​the amount of goods and services produced by a worker per hour increases.
B)​the labor force increases.
C)​the real GDP per capita decreases.
D)​the labor force decreases.

Question 71

Which of the following best describes the relationship between economic growth and literacy?

A)​As the economy grows, literacy declines because it becomes less and less useful in a developed economy.
B)​Increased literacy initially stimulates economic growth by raising labor productivity, but as the economy grows and the opportunity cost of education rises, literacy declines.
C)​Increased literacy stimulates economic growth by raising labor productivity, and as the economy grows, people consume more education.
D)​There is no correlation between economic growth and literacy.

Question 72

Higher levels of savings will result in all of following except:

A)​greater economic growth.
B)​higher capital formation.
C)​more consumption in the future.
D)​lower rates of investment.

Question 73

Most modern economists agree that there is a single factor that can be used to explain economic growth.

A)​This is a true statement because what are needed are abundant resources.
B)​This is a true statement because at the foundation of economic growth, it is essential that there exist extensive private property rights.
C)​This is a false statement because nearly all economists believe that economic growth is a complex process without a single dominant factor.
D)​This is a false statement because economists typically do not agree on policy issues.

Question 74

Many scholars believe that the importance of research and development is understated. Efforts in research and development can include:​

A)​the introduction of new products.
B)​management improvements.
C)​production innovations.
D)​any of the above.

Question 75

Is it possible to have economic growth with no opportunity cost?

A)​Yes, economic growth requires no current sacrifices-only the passage of time.
B)​No, but economic growth is always worth whatever sacrifice is required.
C)​No, because growth depletes the stock of knowledge so that more growth today means less growth tomorrow.
D)​No, because growth requires the sacrifice of consumption goods in order to invest in such things as capital formation and research and development.

Question 76

The per-worker production function is ____ sloped and ____ at a(n) ____ rate.

A)​negatively; decreases; diminishing
B)​negatively; decreases; increasing
C)​positively; increases; increasing
D)​positively; increases; diminishing

Question 77

Technology can enable producers to economize on:

A)​labor
B)​capital
C)​land
D)​any of the above.

Question 78

Improvements in literacy stimulate economic growth by:

A)​reducing the barriers to the flow of information.
B)​improving the flow of resources to more productive uses.
C)​imparting skills, which raises labor productivity.
D)​doing all of the above.

Question 79

Over the last several decades, the amount of government investment in U.S. infrastructure in real terms has:

A)​remained the same.
B)​decreased.
C)​increased marginally.
D)​increased substantially.

Question 80

Which of the following is not considered a significant factor contributing to economic growth by economists today?

A)​work effort is less intense in the heat of the tropics
B)​an increase in the quantity of physical capital
C)​increased use of land inputs
D)​greater division of labor and specialization