Question 1

Is knowledge capital subject to the law of diminishing returns? Explain.

Accepted Answer

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Question 2

One drawback of the patent system is that firms must disclose to the public information about the product or process.

Accepted Answer

One of the requirements of obtaining a patent is that the inventor must disclose enough information about their invention to enable someone skilled in the field to reproduce it. This means that competitors can learn about the product or process and potentially develop a similar version, which could be considered a drawback for the firm holding the patent.

Question 3

According to new growth theory,firms accumulate the efficient level of both physical and knowledge capital.

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Question 4

The easiest way for a country to obtain access to technology is through

Accepted Answer

Promoting foreign direct investment is the quickest way for a country to obtain access to technology. Foreign companies bring in advanced technologies, knowledge and expertise that can be diffused to the local industry. This promotes development of local industries, job creation and economic growth. Subsidizing education and training, policies to enhance saving, and enacting policies to promote property rights are important development policies, but may take longer to have an impact on technology acquisition.

Question 5

Human capital refers to the percentage of the working-age population in the labor force.

Accepted Answer

Human capital refers to the knowledge, skills, and abilities possessed by individuals and the value they can bring to the economy or society. While labor force participation is a factor that can influence human capital development, it is not equivalent to human capital itself.

Question 6

Technological change is the key to sustaining economic growth.

Accepted Answer

Technological change leads to innovation, productivity growth, and competitive advantage, which drives economic growth. Without technological advancements, economies can face stagnation and decline. Hence, technological change is a key factor in sustaining economic growth.

Question 7

Your friend owns a snow cone stand that he works by himself.He produces about 25 snow cones per hour.He wants to be able to produce twice as many snow cones per hour so he buys a second machine.He notices that he can only produce 10 more snow cones an hour.He jokes that he could have doubled his output with the second machine if he only had four hands.Using your knowledge of the production process,explain to your friend what you think has happened when he added more capital to his production process.

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Question 8

The owner of a firm wants some advice on how to increase productivity.Suggest three ways the entrepreneur could increase labor productivity through improving technology.

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Question 9

The Soviet Union's economic growth rate slowed despite rapid increases in capital per hour worked.

Accepted Answer

This phenomenon is known as the Soviet Union's "growth paradox" - despite increases in capital per hour worked, productivity and economic growth slowed down. This can be attributed to issues such as inefficiencies in the Soviet economic system, lack of innovation and competition, and a focus on heavy industries at the expense of consumer goods.

Question 10

Explain how market economies are generally better able to achieve technological progress than are centrally planned economies.

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Question 11

Starting at point B in the diagram below,identify which combinations of points illustrate technological change.Give a brief explanation to support your answer.

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Question 12

According to Joseph Schumpeter,the theory of creative destruction describes a process by which

Accepted Answer

According to Joseph Schumpeter, the theory of creative destruction describes a process by which new products and technologies arise and, in the process, displace older ones. This process involves a "gale of destruction" as the old products and technologies are no longer in demand and become obsolete. Therefore, option B, "new products unleash a gale of destruction that drives old products out of the market," is the best choice. Option A is incorrect because it suggests that new products drive other new products out of the market, which is not necessarily the case. Option C is also incorrect because although capital may be destroyed in the process, it is not the sole factor driving creative destruction. Option D is incorrect because creative destruction by definition involves the replacement of old products with new ones.

Question 13

According to Joseph Schumpeter,which of the factors of production is central to economic growth?

Accepted Answer

According to Joseph Schumpeter, the entrepreneur is the central factor of economic growth. He believed that entrepreneurs bring innovation and new ideas to the market, creating new industries and driving economic growth. Land, labor, and natural resources are important factors, but without entrepreneurial activity, economic growth would be limited.

Question 14

Table 22-3
 $$\begin{array} { | c | c | c | } 
\hline \text { Year } & \begin{array} { c } 
\text { Real GDP per Capita } \
\text { (2009 prices) }
\end{array} & \begin{array} { c } 
\text { Growth Rate in Real } \
\text { GDP per Capita }
\end{array} \
\hline 2013 & \$ 28,000 & \
\hline 2014 & 29,000 & \
\hline 2015 & 30,000 & \
\hline 2016 & 31,000 & \
\hline
\end{array}$$
-Refer to Table 22-3.Use the table above to calculate the annual growth rate in GDP.Also calculate the total percentage change in the growth from 2013 through 2016.Explain the difference between the average annual growth rate in real per capita GDP from 2013 through 2016 and the total percentage change in growth from 2013 and 2016.

Accepted Answer

The answer of Table 22-3
 \[\begin{array} { | c |...

Question 15

One of the results of Paul Romer's new growth theory is that investment in research and development will be too low in an economy.Explain how he comes to this conclusion.

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Question 16

Use production functions from the economic growth model to explain why the United States grew at a much faster rate than the Soviet Union in the latter half of the 20th century.

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Question 17

Technological change allows the economy to produce more output with the same amount of capital and labor.

Accepted Answer

Technological advancements such as automation and improvements in production processes allow for greater efficiency and productivity, ultimately enabling more output to be produced with the same resources.

Question 18

Explain how advances in technology are critical to sustaining economic growth,even if capital per hour worked is consistently increasing.Provide a graph of a per-worker production function to support your answer.

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Question 19

Suggest two policies the government could pursue to help increase the accumulation of knowledge.

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Question 20

Describe the process of "creative destruction" using a specific example.

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Quiz 22: Long-Run Economic Growth: Sources and Policies