Question 1

Long-run increases in living standards, as measured by real GDP per person, are primarily the result of increases in:

Accepted Answer

Long-run increases in living standards are primarily the result of increases in average labor productivity. This is because when workers are able to produce more output per hour worked, there is a larger output to divide among the population, leading to higher real GDP per person. Increases in population, the money supply, and government budget surpluses may have some impact on living standards, but they are not the primary drivers of long-run increases in real GDP per person.

Question 2

When a firm builds a new factory, this is an example of an investment in:

Accepted Answer

Building a new factory requires investments in physical capital such as land, buildings, machinery, and equipment.

Question 3

Providing workers with on-the-job training will increase:

Accepted Answer

On-the-job training can improve workers' skills and knowledge, leading to an increase in their productivity. This, in turn, can increase overall labor productivity.

Question 4

Human capital is:

Accepted Answer

Human capital refers to the skills, education, and training that individuals acquire during their lives, which can then be used to contribute to the economy and society. It is not about physical equipment like factories and machinery, nor is it related to financial resources.

Question 5

In Econland, 500,000 of the 2 million people in the country are employed. Average labor productivity in Econland is $15,000 per worker. Real GDP per person in Econland totals:

Accepted Answer

To find real GDP per person for Econland, multiply the average amount of output each worker produces times the percentage of population employed. In this case, real GDP per person is: ($15,000)× (500,000/2,000,000)= $3,750.

Question 6

One factor that contributed to the growth in the share of population employed in the United States between 1960 and 2008 was increased:

Accepted Answer

The increased participation of women in the labor force was a major factor in the growth of employment in the United States during this time period. Women's participation in the labor force increased from 35% in 1960 to nearly 60% by 2008, resulting in a significant increase in the overall share of the population employed.

Question 7

Workers should invest in additional human capital as long as the:

Accepted Answer

Investing in additional human capital is a trade-off between the costs and benefits. If the marginal benefit (i.e. the additional earnings or productivity gained) from acquiring more human capital through education or training exceeds the marginal cost (i.e. the expenses and opportunity costs of foregoing other activities or income), then it is worth doing so. The optimal level of investment is when MB=MC. Option A is consistent with this principle. Option B implies that the worker is spending more than what they gain, which is not rational. Option C mixes two different concepts since opportunity cost is already accounted for in the marginal cost of investing in human capital. Option D is not realistic since there are always opportunity costs involved in any decision.

Question 8

Fred and Barney fill egg cartons with eggs. Fred just started the job and can fill only 20 cartons an hour. Barney has significant on-the-job experience that allows him to fill 40 cartons an hour. Both Fred and Barney work 40 hours a week. Fred's average weekly productivity is ______ cartons; Barney's average weekly productivity is ______ cartons; and as a team their average weekly productivity is ______ cartons.

Accepted Answer

Fred fills 20 cartons/hour * 40 hours = 800 cartons/week. Barney fills 40 cartons/hour * 40 hours = 1,600 cartons/week. Together, they fill 800 + 1,600 = 2,400 cartons/week, but the question asks for average weekly productivity per person, which is (800 + 1,600) / 2 = 1,200 cartons.

Question 9

Which of the following is an example of an investment in human capital?

Accepted Answer

Investing in workers' education and skills is an example of investing in human capital.

Question 10

In Macroland, 500,000 of the 1 million people in the country are employed. Average labor productivity in Macroland is $20,000 per worker. Real GDP per person in Macroland totals:

Accepted Answer

To find real GDP per person for Macroland, multiply the average output each worker produces times the percentage of population employed. In this case, real GDP per person is: ($20,000)× (500,000/1,000,000)= $10,000.

Question 11

Mike and Tom debone chicken breasts for Ted's Chicken Co. Mike is new and can only debone 60 chicken breasts per hour, while Tom's experience allows him to debone 120 chicken breasts per hour. Both Mike and Tom work 40 hours per week. Their average hourly productivity as a team is ______ chicken breasts.

Accepted Answer

Total chicken breasts deboned by the team per hour = 60 + 120 = 180
Total chicken breasts deboned by the team per week = 180 * 40 = 7200
Average hourly productivity as a team = Total chicken breasts deboned per week / Total hours worked per week = 7200 / (40 * 2) = 90 chicken breasts.

Question 12

Mike and Tom debone chicken breasts for Ted's Chicken Co. Mike is new and can only debone 30 chicken breasts per hour, while Tom's experience allows him to debone 60 chicken breasts per hour. Both Mike and Tom work 40 hours per week. Their average hourly productivity as a team is ______ chicken breasts.

Accepted Answer

To find the average hourly productivity of the team, we need to first find the total number of chicken breasts deboned by both Mike and Tom in one week.

Mike can debone 30 chicken breasts per hour, and he works 40 hours per week, so he can debone a total of 30 x 40 = 1200 chicken breasts per week.

Tom can debone 60 chicken breasts per hour, and he also works 40 hours per week, so he can debone a total of 60 x 40 = 2400 chicken breasts per week.

Therefore, the total number of chicken breasts deboned by the team is 1200 + 2400 = 3600.

To find the average hourly productivity, we divide the total number of chicken breasts by the total number of hours worked by both Mike and Tom.

Both Mike and Tom work 40 hours per week, so their total hours worked as a team is 40 + 40 = 80 hours.

Dividing the total number of chicken breasts (3600) by the total number of hours worked (80) gives us an average hourly productivity of 45 chicken breasts (3600/80 = 45).

Therefore, the correct answer is B, 45 chicken breasts.

Question 13

Getting a college degree is an example of investing in:

Accepted Answer

A college degree represents an investment in an individual's skills, knowledge, and abilities, also known as human capital. It is a type of investment that can result in increased earnings potential and career advancement opportunities. Physical capital refers to tangible assets such as buildings and equipment, technology involves advancements in tools and machinery, and research and development refers to activities aimed at improving products and services.

Question 14

The prediction that workers obtain additional training only when the rewards from the training are expected to exceed the costs of the training (including the opportunity costs) is based on the:

Accepted Answer

The prediction that workers obtain additional training only when the rewards from the training are expected to exceed the costs of the training is based on the cost-benefit principle, which involves comparing the benefits of an action to the costs of taking that action. This principle is often used to explain why individuals make certain decisions, including decisions relating to training and education.

Question 15

Which of the following is an example of an investment in physical capital?

Accepted Answer

The purchase of new equipment for a manufacturing process is an example of an investment in physical capital. Physical capital refers to the tools, equipment, and infrastructure used in the production process. The other choices are investments in human capital (training workers and paying for college classes) and intellectual capital (employing chemists to develop new chemicals).

Question 16

Fred and Barney fill egg cartons with eggs. Fred just started the job and can fill only 25 cartons an hour. Barney has significant on-the-job experience that allows him to fill 50 cartons an hour. Both Fred and Barney work 50 hours a week. Fred's average weekly productivity is ______ cartons; Barney's average weekly productivity is ______ cartons; and as a team their average weekly productivity is ______ cartons.

Accepted Answer

Fred fills 25 cartons/hour * 50 hours = 1,250 cartons/week. Barney fills 50 cartons/hour * 50 hours = 2,500 cartons/week. Together, they fill 1,250 + 2,500 = 3,750 cartons/week, so their average weekly productivity is 1,875 cartons.

Question 17

Economists refer to the talents, training, and education of workers as:

Accepted Answer

Economists refer to the talents, training, and education of workers as human capital.

Question 18

The growth of real GDP per person in the United States between 1960 and 2008 was the result of:

Accepted Answer

The growth of real GDP per person in the United States between 1960 and 2008 was the result of both growth in average labor productivity and the share of population employed. This can be seen from the fact that real GDP per person increased by 2.2% per year during this period, while average labor productivity increased by 1.4% per year and the share of population employed increased by 0.6% per year. Therefore, both factors contributed to the growth of real GDP per person.

Question 19

In the long run, increases in output per person arise primarily from:

Accepted Answer

Increases in output per person come from increases in average labor productivity, which can be achieved through technological advancements, improvements in education and training, and investments in capital resources. Increases in female or male labor force participation or changes in the proportion of the population retiring may affect the overall size of the labor force, but they do not necessarily lead to increases in output per person.

Question 20

If average labor productivity increases, real GDP per person:

Accepted Answer

It is possible that increased average labor productivity is offset by a decline in the share of population employed.

Quiz 7: Economic Growth, Productivity, and Living Standards