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Review of Chapters 25

The document contains 9 review questions covering topics related to production functions, productivity, capital accumulation, and human versus physical capital. The questions assess understanding of concepts like: constant returns to scale and how it relates to rewriting the production function; the impact of doubling all factor inputs except technology on output and productivity; diminishing returns to capital; and the "catch-up effect" related to economic growth. Several questions also ask the reader to identify which factor represents technology in a sample production function or which examples represent human versus physical capital.

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H. Alhemeiri
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83 views2 pages

Review of Chapters 25

The document contains 9 review questions covering topics related to production functions, productivity, capital accumulation, and human versus physical capital. The questions assess understanding of concepts like: constant returns to scale and how it relates to rewriting the production function; the impact of doubling all factor inputs except technology on output and productivity; diminishing returns to capital; and the "catch-up effect" related to economic growth. Several questions also ask the reader to identify which factor represents technology in a sample production function or which examples represent human versus physical capital.

Uploaded by

H. Alhemeiri
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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Review questions for chapters 25:

1. Dilbert’s Incorporated produced 5,000,000 units of accounting software in 2004. At the start of
2005 the pointy-haired boss reduced total annual hours of employment from 10,000 to 8,000 and
production was 4,800,000. These numbers indicate that productivity

a. fell by 4%.
b. fell by 20%.
c. rose by 12%.
d. rose by 20%.

2. Scenario. An economy’s production form takes the form Y = A F(L, K, H, N).


- Refer to the scenario, In the production function, which variable represents technology?
a. A
b. K
c. H
d. N
3. Refer to Scenario. If the production function has the constant-returns-to-scale property, then it
could be rewritten as
a. Y/L = A F(1, K/L, H/L, N/L)
b. Y/L = A F(L, 1, H/L, N/L)
c. Y/L = A F(L, K/L, 1, N/L)
d. Y/L = A F(L, K/L, H/L, 1)

4. Refer to the scenario, If the production function has the constant-returns-to-scale property, then
if we know the values of A, K/L, H/L, and N/L, we also know the value of
a. output.
b. labor productivity
c. A.
d. All of the above are correct.

5. Suppose there are constant returns to scale. Now suppose that over time a country doubles its
workers, its natural resources, its physical capital, and its human capital, but its technology is
unchanged. Which of the following would double?
a. both output and productivity
b. output, but not productivity
c. productivity, but not output
d. neither productivity nor output

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6. If there are diminishing returns to capital, then

a. capital produces fewer goods as it ages.

b. old ideas are not as useful as new ones.

c. increases in the capital stock eventually decrease output.

d. increases in the capital stock increase output by ever smaller amounts.

7. Accumulating capital

a. requires that society sacrifice consumption goods in the present.

b. allows society to consume more in the present.

c. decreases saving rates.

d. involves no tradeoffs.

8. The catch-up effect refers to the idea that

a. saving will always catch-up with investment spending.


b. it is easier for a country to grow fast and so catch-up if it starts out relatively poor.
c. population eventually catches-up with increased output.
d. if investment spending is low, increased saving will help investment to "catch-up."

9. Which of the following would be human capital and physical capital, respectively?

a. for an accounting firm, the accountants’ knowledge of tax laws and the number of hours worked
by those accountants

b. for a grocery store, grocery carts and cash registers.

c. for a restaurant, the chefs’ knowledge about preparing food and equipment in the kitchen

d. for a library, the building and the reference librarians’ knowledge of the Internet

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