Question 1

Once a country is wealthy,

Accepted Answer

A)  it no longer needs any human capital.
B)  capital becomes more productive due to the "catch-up effect."
C)  None of these answers.
D)  it may be harder for it to grow quickly because of the diminishing returns to capital.
E)  it is nearly impossible for it to become relatively poorer.F) C) and D)
G) A) and B)

Question 2

In addition to investment in physical and human capital, what other public policies might a country adopt to increase productivity?

Accepted Answer

In addition to investment in physical an...

Question 3

Thomas Malthus argued that

Accepted Answer

A)  population growth in the future would be subject to diminishing returns.
B)  an ever increasing population is constrained only by the food supply, resulting in chronic famines.
C)  technological progress will continuously generate improvements in productivity and living standards.
D)  labour is the only true factor of production.
E)  private charities and government aid will improve the welfare of the poor.F) A) and D)
G) A) and B)

Question 4

Poor countries often have a difficult time attracting foreign direct investment funds because

Accepted Answer

A)  wages are low in poor countries.
B)  investment risks are quite low in poor countries, so rates of return are low.
C)  property rights are not protected, so investors fear their property may be confiscated.
D)  All of the above are correct.E) C) and D)
F) None of the above

Question 5

Which of the following represents a productivity-enhancing investment in human capital?

Accepted Answer

A)  A new labour-saving technology.
B)  A new health clinic.
C)  A new factory that will employ 1 000 workers.
D)  An increase in fringe benefits, such as paid vacations and overtime pay.E) All of the above
F) B) and D)

Question 6

If a production function exhibits constant returns to scale, then doubling all of the inputs doubles output.

Accepted Answer

A) True 
 B)False

Question 7

In poorer countries, some investments in human capital may not be made because

Accepted Answer

A)  of shortages of water and other natural resources.
B)  families need their children to work, to grow food, and/or to earn income.
C)  investment in physical capital is more important.
D)  they rarely lead to long-term economic growth.E) B) and D)
F) C) and D)

Question 8

What is a production function? Write an equation for a typical production function, and explain what each of the terms represents.

Accepted Answer

A production function is a mathematical ...

Question 9

Our standard of living is most closely related to

Accepted Answer

A)  how hard we work.
B)  our supply of capital, because everything of value is produced by machinery.
C)  our productivity, because our income is equal to what we produce.
D)  our supply of natural resources, because they limit production.E) A) and C)
F) A) and D)

Question 10

When a nation has very little GDP per capita,

Accepted Answer

A)  it is doomed to being relatively poor forever.
B)  None of these answers.
C)  an increase in capital will likely have little impact on output.
D)  it has the potential to grow relatively quickly due to the "catch-up-effect."
E)  it must be a small nation.F) A) and C)
G) All of the above

Question 11

The opportunity cost of growth is

Accepted Answer

A)  a reduction in current investment.
B)  a reduction in current consumption.
C)  a reduction in taxes.
D)  a reduction in current saving.E) B) and C)
F) C) and D)

Question 12

Human capital refers to human-made capital such as tools and machinery, as opposed to natural capital such as rivers and timber.

Accepted Answer

A) True 
 B)False

Question 13

South Africa should grow faster than Lesotho because South Africa has a larger economy.

Accepted Answer

A) True 
 B)False

Question 14

The opportunity cost of additional growth is that someone must forego current consumption.

Accepted Answer

A) True 
 B)False

Question 15

Some economists argue that it is possible to raise the standard of living by reducing population growth.As an economist interested in incentives rather than coercion, what kind of policy would you recommend to slow population growth?

Accepted Answer

Since bearing a child has an opportunity...

Question 16

How do outward-oriented policies affect a nation's productivity?

Accepted Answer

Most economists believe that poor nation...

Question 17

An increase in the capital stock causes labour productivity to

Accepted Answer

A)  decrease and the standard of living to increase.
B)  increase and the standard of living to increase.
C)  decrease and the standard of living to decrease.
D)  increase while the standard of living remains constant.E) B) and C)
F) A) and B)

Question 18

Which of the following expenditures to enhance productivity is most likely to convey a positive externality?

Accepted Answer

A)  FNB buys a new computer.
B)  Lebo pays her university tuition fees.
C)  SASOL leases a new oil field.
D)  General Motors buys a new drill press.E) A) and B)
F) B) and D)

Question 19

Why is productivity related to the standard of living? In your answer be sure to explain what productivity and standard of living mean.Make a list of things that determine labour productivity.

Accepted Answer

The standard of living is a measure of h...

Question 20

Suppose everyone working the land in Exland knows the usefulness of investing in land irrigation systems.Those who work the land may choose not to invest in these profitable irrigation systems as long as

Accepted Answer

A)  the investment is too expensive.
B)  the natural climate, such as abundant rain, makes the irrigation projects unnecessary.
C)  their property rights, with respect to the land, are subject to change.
D)  the government dictates the choice of investment.E) A) and B)
F) A) and C)

Exam 5: Production and Growth

How do outward-oriented policies affect a nation's productivity?

Correct AnswerverifiedMost economists believe that poor nation...View AnswerShow Answer

Poor countries often have a difficult time attracting foreign direct investment funds because

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Why is productivity related to the standard of living? In your answer be sure to explain what productivity and standard of living mean.Make a list of things that determine labour productivity.

Correct AnswerverifiedThe standard of living is a measure of h...View AnswerShow Answer

Once a country is wealthy,

Correct AnswerverifiedShow Answer

South Africa should grow faster than Lesotho because South Africa has a larger economy.

Correct AnswerverifiedShow Answer

When a nation has very little GDP per capita,

Correct AnswerverifiedShow Answer

In addition to investment in physical and human capital, what other public policies might a country adopt to increase productivity?

Correct AnswerverifiedIn addition to investment in physical an...View AnswerShow Answer

Human capital refers to human-made capital such as tools and machinery, as opposed to natural capital such as rivers and timber.

Correct AnswerverifiedShow Answer

Which of the following expenditures to enhance productivity is most likely to convey a positive externality?

Correct AnswerverifiedShow Answer

An increase in the capital stock causes labour productivity to

Correct AnswerverifiedShow Answer

Which of the following represents a productivity-enhancing investment in human capital?

Correct AnswerverifiedShow Answer

What is a production function? Write an equation for a typical production function, and explain what each of the terms represents.

Correct AnswerverifiedA production function is a mathematical ...View AnswerShow Answer

If a production function exhibits constant returns to scale, then doubling all of the inputs doubles output.

Correct AnswerverifiedShow Answer

Suppose everyone working the land in Exland knows the usefulness of investing in land irrigation systems.Those who work the land may choose not to invest in these profitable irrigation systems as long as

Correct AnswerverifiedShow Answer

The opportunity cost of additional growth is that someone must forego current consumption.

Correct AnswerverifiedShow Answer

Thomas Malthus argued that

Correct AnswerverifiedShow Answer

Some economists argue that it is possible to raise the standard of living by reducing population growth.As an economist interested in incentives rather than coercion, what kind of policy would you recommend to slow population growth?

Correct AnswerverifiedSince bearing a child has an opportunity...View AnswerShow Answer

The opportunity cost of growth is

Correct AnswerverifiedShow Answer

Our standard of living is most closely related to

Correct AnswerverifiedShow Answer

In poorer countries, some investments in human capital may not be made because

Correct AnswerverifiedShow Answer

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Most economists believe that poor nation...
View Answer

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The standard of living is a measure of h...
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In addition to investment in physical an...
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Correct Answer
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Correct Answer
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A production function is a mathematical ...
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Correct Answer
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Correct Answer
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Since bearing a child has an opportunity...
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Correct Answer
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