Question 1

"When workers already have a large quantity of capital to use in producing goods and services,giving them an additional unit of capital increases their productivity only slightly." This statement

Accepted Answer

The statement assumes that the quantities of other factors of production, such as human capital and natural resources, are being held constant. Therefore, the statement is not based on an unconventional view of the production process, nor does it assert that capital is subject to increasing returns.

Question 2

Consider three imaginary countries.In Aziria,saving amounts to $3,000 and consumption amounts to $7,000;in Graniva,saving amounts to $2,000 and consumption amounts to $8,000;and in Tanistan,saving amounts to $4,500 and consumption amounts to $10,500.The saving rate is

Accepted Answer

D

Question 3

The traditional view of the production process is that capital is subject to

Accepted Answer

The traditional view of production process holds that as more of a variable input, such as labor, is added to a fixed input, such as capital, the marginal product of the variable input will eventually decline, meaning that each additional unit of input will produce less additional output. This is known as the law of diminishing returns.

Question 4

According to the traditional view of the production function,which of the following values of the additions to output per worker would be consistent with moving from 5 to 6,and then from 6 to 7,and then from 7 to 8 units of capital per worker in that order?

Accepted Answer

According to the traditional view of the production function, the additions to output per worker decrease as more capital is added. Therefore, the highest addition to output per worker is expected when moving from 0 to 1 units of capital per worker. As more capital is added, the additional output generated per unit of capital diminishes. Based on this reasoning, the possible values for the additions to output per worker are as follows: 
- Moving from 5 to 6 units of capital per worker: 40 (highest addition)
- Moving from 6 to 7 units of capital per worker: 34 (diminishing addition)
- Moving from 7 to 8 units of capital per worker: 32 (further diminishing addition)

Among the given answer choices, only option C has the values of 40, 34, and 32, which are consistent with the traditional view of the production function. Therefore, C is the correct choice.

Question 5

Other things the same,when an economy increases its saving rate

Accepted Answer

When an economy increases its saving rate, it means that households and firms are decreasing their current consumption and instead saving more. This will lead to a decrease in current consumption expenditure and a shift of resources towards investment. In the short run, this shift may lead to a decrease in production or output, as less resources are being used for immediate consumption. However, in the long run, this shift towards investment can increase productivity and potential output, leading to higher levels of production later on. Therefore, the correct choice would be option C - consumption falls now and production rises later.

Question 6

Country A and country B are the same except country A currently has more capital.Assuming diminishing returns,if both countries increase their capital by 100 units and other factors that determine output are unchanged,then

Accepted Answer

Diminishing returns implies that as you add more units of a input factor (such as capital), the increase in output would eventually decrease. Since country A already has more capital, the increase in output from adding another 100 units would be less than in country B. Therefore, option C is correct.

Question 7

"When workers already have a large quantity of capital to use in producing goods and services,giving them an additional unit of capital increases their productivity only slightly." This statement

Accepted Answer

This statement reflects the concept of diminishing returns to capital, which is a traditional view of the production process. It assumes other factors like human capital, natural resources, and technology are constant.

Question 8

All else equal,if there are diminishing returns,then what happens to productivity if both capital and labor increase?

Accepted Answer

If there are diminishing returns, the productivity of adding more capital and labor will not necessarily increase. It may increase initially but at a decreasing rate, and beyond a point, it may even start to decrease. Therefore, none of the options are necessarily correct.

Question 9

In an economy where net exports are zero,if saving rises in some period,then in that period

Accepted Answer

In an economy where net exports are zero, if saving rises, it implies that less of the income is being used for consumption, hence consumption falls. The increased saving leads to more funds being available for investment, causing investment to rise.

Question 10

Country A and country B both increase their capital stock by one unit.Output in country A increases by 12 while output in country B increases by 15.Other things the same,diminishing returns implies that country A is

Accepted Answer

Diminishing returns imply that as more capital is added, the additional output from each new unit of capital decreases. Since Country A's output increases by less than Country B's with the same increase in capital, Country A is likely richer and experiencing diminishing returns more strongly. Thus, if Country A adds another unit of capital, the output increase will be less than 12 units.

Question 11

Accumulating capital

Accepted Answer

Accumulating capital involves setting aside resources to invest in capital goods that can increase production in the future. This requires sacrificing consumption goods in the present, as resources are diverted towards building capital. Therefore, choice A is the correct answer. Choice B is incorrect because accumulating capital does not necessarily result in greater consumption in the present, but rather in the future. Choice C is incorrect because accumulating capital involves increasing saving rates, not decreasing them. Choice D is also incorrect because accumulating capital involves tradeoffs between present consumption and future production.

Question 12

Consider three imaginary countries.In Aire,saving amounts to $4,000 and consumption amounts to $12,000;in Bovina,saving amounts to $3,000 and consumption amounts to $24,000;and in Cartar,saving amounts to $10,000 and consumption amounts to $50,000.The saving rate is

Accepted Answer

The saving rate is calculated as saving divided by consumption. In Aire, the saving rate is 4,000/12,000 = 0.33. In Bovina, the saving rate is 3,000/24,000 = 0.125. In Cartar, the saving rate is 10,000/50,000 = 0.2. Therefore, the saving rate is higher in Aire than in Cartar, and it is higher in Cartar than in Bovina.

Question 13

Country A and country B both increase their capital stock by one unit.Output in country A increases by 10 while output in country B increases by 8.Other things the same,diminishing returns implies that country A is

Accepted Answer

Diminishing returns implies that as more and more units of capital are added, the additional output generated will decrease. Since adding one unit of capital in country A led to an increase in output by 10 units, but adding another unit of capital will generate a smaller increase in output (less than 10 units), Country A is experiencing diminishing returns. Therefore, it is poorer than Country B, which added one unit of capital and increased output by 8 units.

Question 14

All else equal,if there are diminishing returns,then which of the following is true if a country increases its capital by one unit?

Accepted Answer

Diminishing returns means that as more units of a factor of production (in this case, capital) are added, the increase in output from each additional unit will eventually decrease. Therefore, if a country increases its capital by one unit, the increase in output will still be positive but less than it was when the previous unit was added. This is consistent with option B.

Question 15

All else equal,if there are diminishing returns,then if a country raised its capital by 100 units last year and by 100 units this year,

Accepted Answer

If there are diminishing returns, then the increase in output decreases with each additional unit of capital. Therefore, the increase in output will be greater when capital is first increased. Since the country raised its capital by 100 units last year, the increase in output was greater then when compared to raising it by another 100 units this year, which would experience the impact of diminishing returns.

Question 16

On a production function,as capital per worker increases,output per worker

Accepted Answer

As capital per worker increases, output per worker increases but at a decreasing rate due to the law of diminishing returns.

Question 17

When a society decides to increase its quantity of physical capital,the society

Accepted Answer

Increasing the quantity of physical capital requires investment which means sacrificing some of the current consumption goods and services in the present. It requires saving some portion of the current income to invest in capital goods for future production. Therefore, the society is in effect deciding to consume fewer goods and services in the present. The other options are incorrect as trade-offs are still required, the rate of economic growth will actually increase in the future due to capital accumulation, and higher savings will lead to more investment and capital accumulation.

Question 18

If there are diminishing returns to capital,then

Accepted Answer

Diminishing returns to capital means that as more capital is added, the additional output produced from each additional unit of capital decreases.

Question 19

One of the Ten Principles of Economics in Chapter 1 is that people face tradeoffs.The growth that arises from capital accumulation is not a free lunch.It requires that society

Accepted Answer

The tradeoff people face when it comes to capital accumulation is sacrificing present consumption for future consumption. Capital accumulation involves investing resources today in order to increase productivity, which leads to higher consumption and standards of living in the future. This requires society to make tradeoffs between present and future consumption.

Question 20

"When workers have a relatively small quantity of capital to use in producing goods and services,giving them an additional unit of capital increases their productivity by a relatively large amount." This statement

Accepted Answer

The statement indicates that workers have a relatively small amount of capital, which implies that they are operating in a region where capital is subject to diminishing returns. The fact that an additional unit of capital can increase their productivity by a relatively large amount suggests that they are operating in a region where the marginal return on capital is relatively high. This is consistent with the view that capital is subject to diminishing returns.

Quiz 12: Production and Growth: Economic Growth and Public Policy

"When workers already have a large quantity of capital to use in producing goods and services,giving them an additional unit of capital increases their productivity only slightly." This statement

Consider three imaginary countries.In Aziria,saving amounts to $3,000 and consumption amounts to $7,000;in Graniva,saving amounts to $2,000 and consumption amounts to $8,000;and in Tanistan,saving amounts to $4,500 and consumption amounts to $10,500.The saving rate is

The traditional view of the production process is that capital is subject to

According to the traditional view of the production function,which of the following values of the additions to output per worker would be consistent with moving from 5 to 6,and then from 6 to 7,and then from 7 to 8 units of capital per worker in that order?

Other things the same,when an economy increases its saving rate

Country A and country B are the same except country A currently has more capital.Assuming diminishing returns,if both countries increase their capital by 100 units and other factors that determine output are unchanged,then

"When workers already have a large quantity of capital to use in producing goods and services,giving them an additional unit of capital increases their productivity only slightly." This statement

All else equal,if there are diminishing returns,then what happens to productivity if both capital and labor increase?

In an economy where net exports are zero,if saving rises in some period,then in that period

Country A and country B both increase their capital stock by one unit.Output in country A increases by 12 while output in country B increases by 15.Other things the same,diminishing returns implies that country A is

Accumulating capital

Consider three imaginary countries.In Aire,saving amounts to $4,000 and consumption amounts to $12,000;in Bovina,saving amounts to $3,000 and consumption amounts to $24,000;and in Cartar,saving amounts to $10,000 and consumption amounts to $50,000.The saving rate is

Country A and country B both increase their capital stock by one unit.Output in country A increases by 10 while output in country B increases by 8.Other things the same,diminishing returns implies that country A is

All else equal,if there are diminishing returns,then which of the following is true if a country increases its capital by one unit?

All else equal,if there are diminishing returns,then if a country raised its capital by 100 units last year and by 100 units this year,

On a production function,as capital per worker increases,output per worker

When a society decides to increase its quantity of physical capital,the society

If there are diminishing returns to capital,then

One of the Ten Principles of Economics in Chapter 1 is that people face tradeoffs.The growth that arises from capital accumulation is not a free lunch.It requires that society

"When workers have a relatively small quantity of capital to use in producing goods and services,giving them an additional unit of capital increases their productivity by a relatively large amount." This statement