Question 1

The marginal product of capital is the increase in
A)capital needed to produce one more unit of output.
B)output from a one-unit increase in capital.
C)labor needed to accompany a one-unit increase in capital.
D)output from a one-dollar increase in capital.

Accepted Answer

The marginal product of capital measures the increase in output that results from a one-unit increase in capital, holding all other factors constant. Therefore, choice B is the correct answer.

Question 2

The table below represents Freedonia's macroeconomic data for Year 1 and Year 2. Suppose that the production function is given by Y = AK^0.25^N^0.75^.Between Year 1 and Year 2,total factor productivity of Freedonia's economy increased by A)-1.5%. B)5)0%. C)5)5%. D)12.7%.

Accepted Answer

A

Question 3

In the production function Y = AF(K,N),total factor productivity is
A)Y/A.
B)A)
C)K/N.
D)Y/N.

Accepted Answer

Total factor productivity (TFP) is defined as the ratio of output to inputs, which cannot be explained by the traditional factors of production (capital and labor). In this production function, the output (Y) is a function of capital (K) and labor (N) and TFP is represented by the term A. Therefore, TFP can be calculated as Y/A, which is option B.

Question 4

Suppose the economy's production function is Y = AK^0.3^N^0.7^.Suppose K = 200,N = 2000,and A = 1.Calculate the marginal product of capital. A)1)0 B)1)5 C)2)0 D)2)5

Accepted Answer

We can find the marginal product of capital (MPK) by taking the derivative of the production function with respect to K: MPK = ∂Y/∂K = A^0.3^N^0.7 Plugging in the given values, we get: MPK = (1)(1)(200)(0.3)(1)(2000)(0.7)(1) = 1,260 Therefore, the marginal product of capital is 1)5, or 1,260 units of output per additional unit of capital.

Question 5

The two main characteristics of the production function are
A)it slopes downward from left to right, and the slope becomes flatter as the input increases.
B)it slopes upward from left to right, and the slope becomes steeper as the input increases.
C)it slopes upward from left to right, and the slope becomes flatter as the input increases.
D)it slopes downward from left to right, and the slope becomes steeper as the input increases.

Accepted Answer

The production function typically slopes upward from left to right because as more input is added, output increases. Additionally, the slope of the production function typically becomes flatter as more input is added, reflecting diminishing marginal productivity.

Question 6

Suppose the economy's production function is Y = AK^0.3^N^0.7^.If K = 2000,N = 100,and A = 1,then Y = 246.If A rises by 10 percent,and K and N are unchanged,by how much does Y increase? A)5% B)10% C)15% D)20%

Accepted Answer

If A rises by 10%, the new value of A will be 1.1. Substituting the new value of A and the values of K and N given in the question, we get: Y = (1.1)2000^0.3^N^0.7^. Y = 270.6 Therefore, Y increases by (270.6-246)/246 * 100% = 10%.

Question 7

The marginal product of labor
A)is measured by the slope of the production function relating capital to employment.
B)is larger when the labor supply is relatively larger.
C)is smaller when the labor supply is relatively smaller.
D)decreases as the number of workers already employed increases.

Accepted Answer

The marginal product of labor decreases as the number of workers already employed increases, which is known as the law of diminishing marginal returns. This means that after a certain point, adding more workers to the production process will result in a smaller increase in output. The other choices are not necessarily true - the slope of the production function relates capital to employment, and the size of the labor supply does not necessarily affect the marginal product of labor.

Question 8

A mathematical expression relating the amount of output produced to quantities of capital and labor utilized is the
A)real interest rate.
B)productivity relation.
C)production function.
D)marginal product.

Accepted Answer

The production function is a mathematical expression that shows the relationship between the quantity of inputs used in production and the quantity of output produced. This function is typically written as Q = f(K,L), where Q is the quantity of output, K is the quantity of capital input, and L is the quantity of labor input.

Question 9

Suppose the economy's production function is Y = AK^0.3^N^0.7^.If K = 2000,N = 100,and A = 1,then Y = 246.If K and N each increase by 5 percent,and A is unchanged,by how much does Y increase? A)5% B)10% C)15% D)20%

Accepted Answer

The production function exhibits constant returns to scale, so a 5% increase in both K and N results in a 5% increase in Y.

Question 10

If the marginal product of capital doesn't change as the amount of capital increases,a figure showing the relationship between output and capital
A)is a straight line with constant upward slope.
B)is a straight line with a slope of zero.
C)is a vertical line.
D)slopes upward with a slope that declines as the amount of capital increases.

Accepted Answer

When the marginal product of capital remains constant as the amount of capital increases, it means that each additional unit of capital adds the same amount to total output. This results in a linear relationship between output and capital, represented by a straight line with a constant upward slope.

Question 11

The fact that the production function relating output to labor becomes flatter as we move from left to right means that
A)the marginal product of labor is positive.
B)the marginal product of capital is positive.
C)there is diminishing marginal productivity of labor.
D)there is diminishing marginal productivity of capital.

Accepted Answer

The flatter production function indicates a decreasing marginal product of labor, which means that each additional unit of labor added results in a smaller increase in output. This is referred to as the law of diminishing marginal productivity of labor. Therefore, choice C is correct. Choices A and B are not correct because the question does not provide any information about the marginal product of labor or capital. Choice D is also incorrect because the question is specifically referring to the production function in relation to labor, not capital.

Question 12

Suppose the economy's production function is Y = AK^0.3^N^0.7^.If K = 2000,N = 100,and A = 1,then Y = 246.If K rises by 10%,and A and N are unchanged,by how much does Y increase? A)30% B)10% C)6% D)3%

Accepted Answer

The answer of Suppose the economy's production function is Y...

Question 13

An adverse supply shock would
A)shift the production function up and decrease marginal products at every level of employment.
B)shift the production function down and decrease marginal products at every level of employment.
C)shift the production function down and increase marginal products at every level of employment.
D)shift the production function up and increase marginal products at every level of employment.

Accepted Answer

An adverse supply shock would decrease the availability of inputs and increase the cost of production, leading to a shift in the production function down. This would result in decreased marginal products at every level of employment.

Question 14

The fact that the production function relating output to capital becomes flatter as we move from left to right means that
A)the marginal product of labor is positive.
B)the marginal product of capital is positive.
C)there is diminishing marginal productivity of labor.
D)there is diminishing marginal productivity of capital.

Accepted Answer

As we move from left to right, the slope of the production function decreases, indicating diminishing marginal productivity of capital. This means that each additional unit of capital used in production adds less and less to the total output.

Question 15

Suppose the economy's production function is Y = AK^0.3^N^0.7^.When K = 1000,N = 50,and A = 15,what is Y? A)1842 B)6106 C)750,000 D)123

Accepted Answer

The answer of Suppose the economy's production function is Y...

Question 16

Because of diminishing marginal productivity
A)the labor supply curve is not vertical.
B)nominal wages are sticky in a downward direction.
C)the labor demand curve is negatively sloped.
D)households save only a small share of their income.

Accepted Answer

Diminishing marginal productivity implies that each additional unit of labor added to the production process will result in a smaller increase in output. As a result, employers will be willing to hire fewer workers at higher wage rates, leading to a negatively sloped labor demand curve.

Question 17

Suppose the economy's production function is Y = AK^0.3^N^0.7^.If K = 2000,N = 100,and A = 1,then Y = 246.If K and N both rise by 20%,and A is unchanged,by how much does Y increase? A)5% B)10% C)15% D)20%

Accepted Answer

If K and N both increase by 20%, new values will be K = 2400 and N = 120.

Thus, the new production function is Y = 1*2400*S1U1P10.3S1S1120P0S1U1P10.7S1S1120P0S1U1P1.S1S1120P0

Plugging in these new values, we get Y = 295.2

The percentage increase in Y is (295.2-246)/246 * 100% = 20%.

Therefore, Y increases by 20%.

Question 18

Suppose that Freedonia has GDP equal to 2000 million,the capital stock is 1700 million,and the number of employees equals 70 million.The production function is Y = AK^0.25^N^0.75^.Total factor productivity of the economy is approximately equal to A)0)09. B)2)61. C)4)19. D)12.87.

Accepted Answer

The production function given is Y = AK^0.25L^0.75. Given Y (GDP) = 2000 million, K (capital stock) = 1700 million, and L (number of employees) = 70 million, we can solve for A (total factor productivity). Rearranging the production function to solve for A gives us A = Y / (K^0.25 * L^0.75). Plugging in the given values: A = 2000 / (1700^0.25 * 70^0.75) ≈ 12.87.

Question 19

In the production function Y = AF(K,N),A is ________,K is ________,and N is ________.
A)total factor productivity; the capital stock; the number of workers employed
B)total factor productivity; investment; the number of workers employed
C)the productivity of labor; the capital stock; the size of the labor force
D)the productivity of labor; investment; the size of the labor force

Accepted Answer

In the production function Y = AF(K,N), A represents total factor productivity, which measures the efficiency with which inputs are used in production. K represents the capital stock, which includes physical assets like buildings and equipment used in production. N represents the number of workers employed.

Question 20

If Y = A × N × (75 + K/N),where K = 1000,N = 20,and A = 10,what happens if K doubles and N doubles?
A)Y is unchanged.
B)Y increases by 50%.
C)Y doubles.
D)Y quadruples.

Accepted Answer

When K doubles to 2000 and N doubles to 40, we have:

Y = A × N × (75 + K/N)
Y = 10 × 40 × (75 + 2000/40)
Y = 10 × 40 × (75 + 50)
Y = 10 × 40 × 125
Y = 50,000

Thus, Y doubles from its original value of Y = 10 × 20 × (75 + 1000/20) = 50,000. Therefore, the correct choice is C.

Quiz 3: Productivity, output, and Employment

The marginal product of capital is the increase in

The table below represents Freedonia's macroeconomic data for Year 1 and Year 2. Suppose that the production function is given by Y = AK^0.25^N^0.75^.Between Year 1 and Year 2,total factor productivity of Freedonia's economy increased by

In the production function Y = AF(K,N) ,total factor productivity is

Suppose the economy's production function is Y = AK^0.3^N^0.7^.Suppose K = 200,N = 2000,and A = 1.Calculate the marginal product of capital.

The two main characteristics of the production function are

Suppose the economy's production function is Y = AK^0.3^N^0.7^.If K = 2000,N = 100,and A = 1,then Y = 246.If A rises by 10 percent,and K and N are unchanged,by how much does Y increase?

The marginal product of labor

A mathematical expression relating the amount of output produced to quantities of capital and labor utilized is the

Suppose the economy's production function is Y = AK^0.3^N^0.7^.If K = 2000,N = 100,and A = 1,then Y = 246.If K and N each increase by 5 percent,and A is unchanged,by how much does Y increase?

If the marginal product of capital doesn't change as the amount of capital increases,a figure showing the relationship between output and capital

The fact that the production function relating output to labor becomes flatter as we move from left to right means that

Suppose the economy's production function is Y = AK^0.3^N^0.7^.If K = 2000,N = 100,and A = 1,then Y = 246.If K rises by 10%,and A and N are unchanged,by how much does Y increase?

An adverse supply shock would

The fact that the production function relating output to capital becomes flatter as we move from left to right means that

Suppose the economy's production function is Y = AK^0.3^N^0.7^.When K = 1000,N = 50,and A = 15,what is Y?

Because of diminishing marginal productivity

Suppose the economy's production function is Y = AK^0.3^N^0.7^.If K = 2000,N = 100,and A = 1,then Y = 246.If K and N both rise by 20%,and A is unchanged,by how much does Y increase?

Suppose that Freedonia has GDP equal to 2000 million,the capital stock is 1700 million,and the number of employees equals 70 million.The production function is Y = AK^0.25^N^0.75^.Total factor productivity of the economy is approximately equal to

In the production function Y = AF(K,N) ,A is ,K is ,and N is .

If Y = A × N × (75 + K/N) ,where K = 1000,N = 20,and A = 10,what happens if K doubles and N doubles?