Question 1

Labor productivity increases when
A)labor and output increase proportionately.
B)capital increases and labor remains constant.
C)output decreases and labor increases.
D)capital/labor ratio decreases.

Accepted Answer

Labor productivity increases when capital increases and labor remains constant. This is because with more capital, workers can work more efficiently and produce more output with the same amount of labor. The other choices are incorrect as they either involve decreasing output or increasing labor without a corresponding increase in capital, which would not lead to an increase in labor productivity.

Question 2

Thinking up a new idea is an example of
A)an invention.
B)an innovation.
C)human capital accumulation.
D)social overhead capital.

Accepted Answer

Thinking up a new idea is the first step in the invention process. An invention is a new idea, product, or process that is made by an individual or group. It is the result of creative thinking and can lead to innovation.

Question 3

An increase in the capital stock
A)can increase output,even if it is not accompanied by an increase in the labor force.
B)provides valuable services directly,but not indirectly.
C)can increase output,but only if it is accompanied by an increase in the labor force.
D)cannot increase output,even if it is accompanied by an increase in the labor force.

Accepted Answer

An increase in the capital stock can increase output even if labor force remains constant. This is because capital and labor are complementary factors of production, and an increase in capital improves the productivity of labor. Therefore, an increase in capital stock can lead to an increase in output, even without an increase in the labor force.

Question 4

Technical change which results in a change in the production process is known as
A)disembodied technical change.
B)embodied technical change.
C)per-capita technical change.
D)technical catch-up.

Accepted Answer

The answer of Technical change which results in a change...

Question 5

Suppose that growth in output that can be attributed to growth in labor and capital is 2%.If output grows at a rate of 5%,it must be the case that
A)growth in labor exceeds growth in capital.
B)growth in capital exceeds growth in labor.
C)the economy is experiencing technological progress.
D)the economy is not spending enough on acquiring human capital.

Accepted Answer

The difference between the total output growth (5%) and the growth attributed to labor and capital (2%) suggests that the additional growth is due to factors other than labor and capital, such as technological progress. This is known as growth in total factor productivity.

Question 6

An increase in human capital
A)increases the productivity of labor.
B)decreases the productivity of labor.
C)increases the productivity of labor only if there is a corresponding technological change.
D)increases the capital-labor ratio.

Accepted Answer

Human capital refers to the skills, knowledge, and experience a person possesses that contribute to their productivity in labor. Therefore, increasing human capital would result in an increase in the productivity of labor.

Question 7

A company uses 100 workers and 30 units of capital to produce 500 units of output.If this company increases its capital to 50 units and,as a result,its output increases by 300 units,the productivity of labor ________ to ________ units per worker.
A)increases; 8
B)increases; 1
C)increases; 3
D)decreases; 4

Accepted Answer

Initially, the productivity of labor is 500 units of output / 100 workers = 5 units per worker. After increasing capital, output increases to 800 units (500 + 300). With the same number of workers (100), the new productivity of labor is 800 units / 100 workers = 8 units per worker. Therefore, productivity increases to 8 units per worker.

Question 8

A researcher discovered the adhesive that allows a piece of paper to be attached to a surface temporarily and then removed and reattached many times.It was many years before a use was found for this adhesive.Which of the following is TRUE?
A)The discovery represents an invention and the finding of a use for the adhesive represents an innovation.
B)The discovery represents an innovation and the finding of a use for the adhesive represents an invention.
C)This is an example of an invention only.
D)This is an example of an innovation only.

Accepted Answer

The discovery of the adhesive is an invention, as it is a new idea or product that did not exist before. The finding of a use for the adhesive, which is the creation of Post-it Notes, is an innovation, as it is the application of the invention in a new way that creates value in the market.

Question 9

An increase in the quality of capital is a result of
A)population growth.
B)disembodied technical change.
C)embodied technical change.
D)an increase in the labor force.

Accepted Answer

Embodied technical change refers to improvements in the quality of capital, such as new and better machinery or equipment with improved features and greater efficiency. Population growth or an increase in the labor force may lead to an increase in the quantity of capital, but not necessarily an increase in quality. Disembodied technical change refers to improvements in technology or knowledge that can be applied to any type of capital, but does not directly improve the quality of capital.

Question 10

Embodied technical change is one reason why
A)human capital is more valued in an economy than physical capital.
B)the quality of capital had decreased.
C)labor productivity has increased over time.
D)increases in population decrease labor productivity.

Accepted Answer

Embodied technical change refers to improvements in technology that occur within the production process. These improvements, such as the introduction of new machinery or software, can lead to increases in labor productivity as workers are able to produce more output per hour. Therefore, option C is the correct answer. The other options are not directly related to embodied technical change.

Question 11

A company uses 200 workers and 50 units of capital to produce 1,000 units of output.Its average labor productivity is
A)4.
B)5.
C)20.
D)25.

Accepted Answer

Average labor productivity is calculated by dividing the total output by the number of workers. 
In this case, the total output is 1,000 and the number of workers is 200. 
Therefore, average labor productivity = 1,000/200 = 5. 
Option B is the correct answer.

Question 12

A firm used to produce a product using three units of labor and one unit of capital.The firm discovers that it can produce more output at a lower cost if it combines two units of labor with two units of capital.This is an example of
A)an innovation.
B)an invention.
C)increasing returns.
D)economic growth.

Accepted Answer

This situation describes an innovation, which is a new way of using resources to produce goods or services more efficiently. It is not an invention as no new technology or product has been created. Also, increasing returns and economic growth refer to the overall growth of an economy, rather than a specific production process improvement.

Question 13

Which of the following is NOT an investment in human capital?
A)local governments begin providing free hepatitis vaccinations to any resident who wants one
B)the Precision Tool Company teaches all its workers how to repair all the machines in the factory
C)older workers return to school to update their skills
D)the Ferris Advertising Agency replaces its secretaries' typewriters with personal computers

Accepted Answer

Investments in human capital typically involve improving the skills, knowledge, or health of individuals. Replacing typewriters with personal computers is an investment in physical capital, not human capital.

Question 14

An important source of increasing productivity is
A)an increase in the ratio of capital to labor.
B)an increase in the ratio of labor to capital.
C)a decrease in the ratio of capital to labor.
D)faster growth in the labor force than in the capital stock.

Accepted Answer

An increase in the ratio of capital to labor is an important source of increasing productivity because it allows for the use of more advanced technology and equipment, which can lead to more efficient production processes and higher output per worker.

Question 15

If labor productivity in a steel mine is 3.5 tons per worker,then 400 steel workers with a fixed amount of capital produce
A)87.5 tons.
B)1,400 tons.
C)1,750 tons.
D)4,000 tons.

Accepted Answer

The answer of If labor productivity in a steel mine...

Question 16

In all economies experiencing modern economic growth,
A)labor expands at a more rapid pace than capital.
B)capital and labor expand at a constant rate.
C)capital expands at a more rapid pace than labor.
D)capital expands,but labor remains constant.

Accepted Answer

In all economies experiencing modern economic growth, capital expands at a more rapid pace than labor. This is because modern economic growth is characterized by the increased use of technology and capital-intensive methods of production, which require more capital but not necessarily more labor.

Question 17

Which of the following is NOT an investment in human capital?
A)an individual decides to enroll in a vocational training program
B)a firm engages in on-the-job training
C)the government expands its programs to improve health care
D)the government increases the level of unemployment benefits

Accepted Answer

Increasing the level of unemployment benefits is not an investment in human capital because it does not enhance the skills, knowledge, and abilities of workers. It provides financial support during periods of unemployment, but does not necessarily lead to long-term improvements in human capital.

Question 18

An increase in capital stock
A)enhances labor productivity.
B)provides valuable services directly.
C)causes economic growth.
D)all of the above

Accepted Answer

Increasing capital stock can enhance labor productivity as workers have access to better tools and equipment. It can also provide valuable services directly as more capital goods can lead to the production of more goods and services. Ultimately, an increase in capital stock is a key driver of economic growth, as it allows for more efficient and effective use of resources.

Question 19

Suppose that growth in output that can be attributed to growth in labor and capital is 6%.If output grows at a rate of 6%,it must be the case that
A)the economy is not experiencing technological progress.
B)growth in labor force exceeds growth in capital.
C)growth in capital exceeds growth in labor.
D)the economy is experiencing technological progress.

Accepted Answer

If output growth is entirely attributed to growth in labor and capital, it implies there is no additional growth from technological progress or improvements in efficiency.

Question 20

Which of the following could result in negative disembodied technical change?
A)environmental regulations
B)health regulations
C)safety regulations
D)all of the above

Accepted Answer

Disembodied technical change refers to changes in technology that lead to an increase in productivity without any corresponding increase in inputs or resources. However, if these changes are driven by regulations that impose costs on firms, such as environmental, health, or safety regulations, the resulting technical change may be negative, as it may reduce the incentives for firms to innovate and invest in productivity-enhancing technologies. Thus, all of the above choices could result in negative disembodied technical change.

Quiz 17: Long-Run Growth

Labor productivity increases when

Thinking up a new idea is an example of

An increase in the capital stock

Technical change which results in a change in the production process is known as

Suppose that growth in output that can be attributed to growth in labor and capital is 2%.If output grows at a rate of 5%,it must be the case that

An increase in human capital

A company uses 100 workers and 30 units of capital to produce 500 units of output.If this company increases its capital to 50 units and,as a result,its output increases by 300 units,the productivity of labor to units per worker.

A researcher discovered the adhesive that allows a piece of paper to be attached to a surface temporarily and then removed and reattached many times.It was many years before a use was found for this adhesive.Which of the following is TRUE?

An increase in the quality of capital is a result of

Embodied technical change is one reason why

A company uses 200 workers and 50 units of capital to produce 1,000 units of output.Its average labor productivity is

A firm used to produce a product using three units of labor and one unit of capital.The firm discovers that it can produce more output at a lower cost if it combines two units of labor with two units of capital.This is an example of

Which of the following is NOT an investment in human capital?

An important source of increasing productivity is

If labor productivity in a steel mine is 3.5 tons per worker,then 400 steel workers with a fixed amount of capital produce

In all economies experiencing modern economic growth,

Which of the following is NOT an investment in human capital?

An increase in capital stock

Suppose that growth in output that can be attributed to growth in labor and capital is 6%.If output grows at a rate of 6%,it must be the case that

Which of the following could result in negative disembodied technical change?