Deck 4: Overcoming Diminishing Returns: Technology As an Externality

Question 1

The reason that an increase in α in the production function y = Ak^α makes growth more responsive to investment is:

A) the higher the coefficient α, the more curved the production function becomes.
B) the higher the coefficient α, the lower the production function becomes.
C) the higher the coefficient α, the straighter is the related saving function.
D) the more curved is the related saving function, the more the steady state is affected by changes in the saving rate σ, population growth n, and depreciation δ.

Answer 1

C

Question 2

An implication of the AK model is that:

A) investment can generate long-run growth.
B) the economy will never reach a steady state.
C) investment is subject to diminishing returns.
D) savings will diminish but never cease entirely.

Answer 2

A

Question 3

The fundamental logic behind the AK model is:

A) there are no diminishing returns when there is technological progress.
B) there is permanent economic growth when there is technological progress.
C) there are no diminishing returns when all factors are reproducible.
D) there is no economic growth unless all factors are reproducible.

Answer 3

C

Question 4

In Rebelo's AK model, the parameter α in the production function y = Ak^α is:

A) α = 1.
B) α < 1.
C) α > 1.
D) 0 < α < 1.

Question 5

In Rebelo's AK model, the production function is:

A) a sharply rounded curve.
B) an upward-sloping straight line.
C) an increasingly steep downward-sloping curve to reflect falling costs.
D) a horizontal straight line.

Question 6

In the AK model, the capital stock grows according to:

A) g_k = σA - δ.
B) g_k = σAk - δ.
C) g_k = Ak^α - δ.
D) g_k = 0.

Question 7

The AK model is important because:

A) investment is indeed the primary source of all economic growth.
B) technological progress can make the economy behave as if it had an AK production function.
C) in the long run, there are no diminishing returns.
D) all factors are essentially reproducible in some form.

Question 8

In the Cobb-Douglas production function, the closer capital's share of income is to 1:

A) the closer to a straight line is the production function.
B) the more concave the production function.
C) the more convex the production function.
D) the more labor is used in the production process.

Question 9

All things equal, an economy with a higher capital share of income, α,relative to an economy with a smaller capital share will:

A) experience a shorter transitional period to a new steady state whenever saving rates change.
B) experience a longer transitional period to a new steady state whenever saving rates change.
C) experience the same transitional period to a new steady state whenever saving rates change.
D) experience no transitional period.

Question 10

The AK model generates permanent economic growth despite the absence of technological progress. Per worker output, y, grows at the economy's rate according to the AK model.

A) population growth.
B) capital growth.
C) depreciation.
D) saving.

Question 11

The S-curve graphically illustrates:

A) the relationship between the rate at which capital gets worn out and time.
B) the relationship between educational attainment levels and technological progress.
C) the relationship between the diffusion of technology and time.
D) the relationship between saving rates and technological progress.

Question 12

Nearly a century ago, Alfred Marshall (1920) devoted an entire chapter of his popular economics textbook to the Concentration of Specialized Industries in Particular Localities. Marshall attributed concentration to three factors. Which of the following is not one of the factors that Marshall mentioned?

A) industries are prone to concentration because of the availability of specialized labor.
B) industries are prone to concentration because of the development of specialized suppliers of intermediate goods and services.
C) industries are prone to concentration because of the flows of technology between the industries.
D) industries are prone to concentration because of geographic proximity to institutions of higher learning.

Question 13

According to Weitzman (1996), An abstract case could be made that all innovations, being expressions of human imagination, are in a sense __.

A) arithmetic.
B) multiplicative.
C) combinatoric.
D) path dependent.

Question 14

In addressing the issue of international trade and technological progress, the noted French mathematician/physicist Jules Henri Poincaré wrote: To create consists precisely in not making useless combinations and in making those which are useful.... Among chosen combinations the most fertile will often be those formed of elements drawn from domains which ___.

A) are in the same line of specialized research.
B) are feasible.
C) are profitable.
D) are far apart.

Question 15

Which of the following is not one of the ways in which technological progress grows as a result of an externality?

A) technology grows through the process of investment.
B) technology grows through increasing returns to scale.
C) technology grows through the process of international trade.
D) technology grows through decreasing returns to scale.

Question 16

Learning-by-doing example: During World War II, the Liberty ship program saw unit costs decline:

A) about 50% a year.
B) about 12-24% with each doubling of output.
C) about 25-50% with each doubling of output.
D) none of the above.

Question 17

Endogenous growth models:

A) explicitly specify how technology is accumulated.
B) explicitly specify how capital is accumulated.
C) ignore technology and capital accumulation, but focus on labor instead.
D) take technological progress as an exogenous variable that influences all the remaining endogenous variables.

Question 18

Which of the following products was quickest to develop and spread in popularity?

A) Electric motors.
B) Computers.
C) Automobiles.
D) It is difficult to say which one developed quicker, given that each built on earlier ideas.

Question 19

Technological progress has been characterized as:

A) path dependent.
B) incremental.
C) continuous.
D) All of the above.
E) None of the above.

Question 20

Technology is often described as:

A) a rival good.
B) an excludable good.
C) a nonrival good.
D) a free good.

Question 21

The creation of technology is hampered by the fact that:

A) ideas are rival goods.
B) ideas are easily excludable in a variety of ways.
C) patents and copyrights are awarded or enforced in all countries.
D) knowledge is often nonrival in nature.

Question 22

Among the characteristics of technology is/are:

A) the growth path of technology is not continuous.
B) the growth path of technology can be represented by a line with a constant slope.
C) it is at least partially nonrival in nature.
D) it is usually excludable.

Question 23

Among the characteristics of technology is/are:

A) technological progress is often the result of intentional, costly activity.
B) technology consists of a complex set of knowledge, ideas, and methods.
C) it is often nonrival and nonexcludable.
D) All of the above.
E) None of the above.

Question 24

The endogenous growth models based on equipment investment and learning-by-doing assume that technological progress enters the neoclassical production function as:

A) the result of intentional R&D activity by profit-motivated producers.
B) the result of investment in human capital.
C) an increase in the quantity of the factors.
D) an externality.

Question 25

The endogenous growth models based on equipment investment and learning-by-doing assume that technology is related to:

A) the economy's total capital stock.
B) the economy's level of production.
C) other variables in the model.
D) All of the above.
E) None of the above.

Question 26

Externalities:

A) are incidental by-products of some other economic activity or activities not taken into consideration by those engaged in that other economic activity.
B) make modeling economic growth more difficult because the assumption of perfect competition must be abandoned.
C) are the results of economic activity that have no noticeable costs or benefits.
D) occur very seldom in the real world.

Question 27

Evidence of learning-by-doing has been found in the following industries:

A) wartime shipbuilding.
B) wartime aircraft production.
C) computer memory chips.
D) All of the above.
E) None of the above.

Question 28

In both the computer memory chip industry and the Liberty ship program, unit costs declined:

A) about 50 percent per year.
B) about 10 percent with each new ship or chip produced.
C) about 20 percent with each doubling of output.
D) about 50 percent with each doubling of output.

Question 29

A learning curve relates:

A) the costs of production to the education of the labor force.
B) the amount of knowledge acquired with additional years of schooling.
C) salaries to the amount of schooling.
D) per unit costs of production of a certain product to its cumulative production.

Question 30

When the learning-by-doing process is specified as εE = BY, then when we incorporate this technological progress into a standard neoclassical model with labor augmenting technological progress, the growth of technology ends up as a function of:

A) the size of the total labor force.
B) the level of investment.
C) the depreciation rate.
D) All of the above.
E) None of the above.

Question 31

The learning-by-doing model:

A) exhibits increasing returns to scale.
B) generates permanent economic growth as long as population remains constant.
C) specifies output as a function of the size of the labor force.
D) specifies that the rate of learning increases as cumulative output increases.
E) All of the above.

Question 32

What comes first, basic scientific research or applied research?

A) Basic research.
B) Applied Research.
C) Either one can precede the other.
D) Neither; accidental discovery always comes first.

Question 33

Technological progress:

A) is similar no matter where it occurs and can be modeled by a single model.
B) is diverse and probably requires several different models.
C) is always intentional and costly, and thus the Schumpeterian R&D model is the correct model of technological progress.
D) eliminates diminishing returns, which means the AK model is the correct model of technological progress.

Question 34

Paul Romer's definition of technology includes:

A) institutions.
B) production methods.
C) managerial procedures.
D) All of the above.
E) None of the above.

Question 35

The Solow residual is estimated using the following equation:

A) r = g_Y - αg_K - (1-α)g_L.
B) r = g_y + αg_k.
C) r = g_y + αg_k + Z.
D) r = g_Y + αg_K + (1-α)g_L.

Question 36

The Solow residual is:

A) usually very small.
B) the part of economic growth that is caused by growth of the factors of production.
C) a measure of total factor productivity.
D) that proportion of economic growth not explained by any of the variables included in the Solow model.

Question 37

A measure of an economy's technological progress can be found if there is data on:

A) the growth of labor and capital, the income shares of labor and capital, and the growth of total output (GDP).
B) the growth of output and the growth of population.
C) the economy's expenditures on education.
D) the economy's level of investment, depreciation, and population growth.

Question 38

The estimates of total factor productivity presented in the Supplement 4-2 suggest that technological progress:

A) is similar in most countries.
B) varies across countries but is nearly constant in each country from one period to another.
C) varies quite a bit across countries and over time.
D) is very slow in developing economies and fast in highly-developed countries.

Question 39

One of the issues not dealt with in most studies of total factor productivity but specifically addressed in Fuess and Van den Berg's studies is:

A) intensity of capital use.
B) depreciation of human capital.
C) the inclusion of household activity in the measure of the economy's total output.
D) All of the above.
E) None of the above.

Question 40

Researchers seeking to estimate total factor productivity often use investment to proxy the growth of the capital stock, but investment is an inaccurate measure of true g_K because:

A) investment data ignores depreciation.
B) investment data ignores the intensity with which capital is used
C) investment data does not always measure the quality of new equipment versus old equipment.
D) All of the above.
E) None of the above.