Question 1

It is possible for a country without a lot of domestic natural resources to have a high standard of living.

Accepted Answer

A country can rely on trade, innovation, technology, and human capital to attain a high standard of living, even if it does not have abundant natural resources. Countries like Japan, Singapore, and Switzerland serve as examples of this.

Question 2

A forest is an example of a nonrenewable resource.

Accepted Answer

A forest is actually an example of a renewable resource because it can regrow and replenish over time if managed properly.

Question 3

Over the period 1900-2008, Brazil's rate of economic growth exceeded that of China.

Accepted Answer

The answer of Over the period 1900-2008, Brazil's rate of...

Question 4

Productivity can be computed as the number of hours worked divided by output.

Accepted Answer

Productivity is typically computed as output divided by the number of hours worked, not the other way around.

Question 5

The same size decrease in the amount of capital stock per worker will cause output per worker to fall by more in a country with a relatively high level of capital per worker than in a country with a relatively low level of capital per worker.

Accepted Answer

According to the principle of diminishing returns in economics, in a country with a relatively low level of capital per worker, a decrease in the amount of capital stock per worker will have a more significant impact on output per worker because when capital per worker is initially low, it is more productive. Conversely, in a country with a high level of capital per worker, the impact of a decrease in capital stock per worker on output per worker is less pronounced due to the diminishing marginal productivity of capital.

Question 6

International data on the history of real GDP growth rates shows that over the last 110 years or so, rich countries got richer and poor countries got poorer.

Accepted Answer

This statement is incorrect. While there has been inequality in income growth rates across countries over the past century, it is not accurate to say that all rich countries got richer and all poor countries got poorer. Some low-income countries have experienced significant economic growth and development over the past few decades.

Question 7

If a production function has constant returns to scale, then if all inputs double so does production.

Accepted Answer

Constant returns to scale means that doubling all inputs results in production doubling as well. Therefore, the statement is true.

Question 8

Human capital is the term economists use to refer to the knowledge and skills that workers acquire through education, training, and experience.

Accepted Answer

This is the commonly accepted definition of human capital in economics.

Question 9

Journey Motorcycles produced 100 motorcycles using 50 workers who each worked 8 hours a day. Journey's productivity was 12.5.

Accepted Answer

The answer of Journey Motorcycles produced 100 motorcycles using 50...

Question 10

If Country A produces 7,000 units of goods and services using 700 hours of labor, and if Country B produces 5,500 units of goods and services using 500 units of labor, then productivity is lower in Country A than in Country B.

Accepted Answer

Productivity is measured as the amount of output per unit of input (in this case, output per hour of labor). 
Country A produces 10 units of goods and services per hour of labor (7,000/700), while Country B produces 11 units of goods and services per hour of labor (5,500/500). Therefore, productivity is lower in Country A than in Country B.

Question 11

As capital per worker rises, output per worker rises. However, this increase in output per worker is smaller at larger levels of existing capital per worker.

Accepted Answer

This is known as the diminishing marginal productivity of capital. As more capital is added, it will still increase output per worker, but the increase will become smaller and smaller.

Question 12

Indonesians, for example, have a lower standard of living than Americans because they have a lower level of productivity.

Accepted Answer

Standard of living is closely tied to productivity, and as Indonesia has a lower level of productivity than the United States, it is likely that Indonesians have a lower standard of living.

Question 13

Constant returns to scale is the point on a production function where increasing inputs will no longer increase output.

Accepted Answer

Constant returns to scale occur when increasing all inputs by a certain proportion results in output increasing by the same proportion, not a point where increasing inputs will no longer increase output.

Question 14

Increases in both human capital per worker and physical capital per worker increase productivity.

Accepted Answer

Both human capital (such as education and training) and physical capital (such as equipment and machinery) contribute to increased productivity. When workers have more knowledge, skills, and technology to work with, they are able to produce more output per hour worked.

Question 15

An increase in the saving rate permanently increases the growth rate of real GDP per person.

Accepted Answer

An increase in the saving rate can lead to a higher level of income in the long run by increasing the capital stock and productivity, but it does not permanently increase the growth rate of real GDP per person. According to the Solow growth model, the growth rate eventually returns to its steady-state level, determined by factors like technology growth and labor force growth, not by the saving rate.

Question 16

Petroleum is an example of a nonrenewable resource.

Accepted Answer

Petroleum, also known as crude oil, is a fossil fuel that is formed from the remains of dead plants and animals over millions of years. It is a finite resource that cannot be replenished in our lifetime, making it nonrenewable.

Question 17

If they could increase their growth rates slightly, countries with low income would catch up with rich countries in about ten years.

Accepted Answer

This statement is not accurate. Catching up with rich countries involves more than just increasing growth rates. It also requires improvements in institutions, infrastructure, education, and other factors. Additionally, the exact time frame for catching up would depend on the starting point and the specific policies and actions implemented.

Question 18

Like physical capital, human capital is a produced factor of production.

Accepted Answer

Human capital refers to the skills, knowledge, and experience that a person possesses and can use in the production process. This is something that is produced through education, training, and experience, making it a produced factor of production.

Question 19

Historical trends in the prices of most natural resources compared to prices of other goods indicate that most natural resources have become scarcer over time.

Accepted Answer

Historical trends show that despite increasing consumption, technological advancements and better extraction methods have often led to an increase in the availability of many natural resources, causing their prices to decrease relative to other goods when adjusted for inflation.

Question 20

If a country has a higher level of productivity than another, then it also has a higher level of real GDP.

Accepted Answer

Higher productivity means a country can produce more output per unit of input, but it doesn't necessarily translate to a higher level of real GDP. Real GDP is influenced by other factors as well, such as the total amount of labor and capital in the economy. A country with lower productivity could still have a higher real GDP if it has significantly more resources or labor.

Quiz 7: Production and Growth