Review-Chapter 25

Productivity is defined as

• the amount of difficulty that is involved in producing a given quantity of goods and services

• the quantity of labor that is required to produce one unit of goods and services

• the quantity of goods and services produced from each unit of labor input

• the quantity of goods and services produced over a given amount of time

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

•    fell by 4%

• fell by 20%

• rose by 12%

• rose by 20%

If an economy’s production form takes the form Y = A F(L, K, H, N).

In the production function, which variable represents technology?

• A

• K

• H

• N

If the production function Y = A. F(L, K, H, N) has the constant-returns-to-scale property, then it could be rewritten as

• Y/L = A F(1, K/L, H/L, N/L)

• Y/L = A F(L, 1, H/L, N/L)

• Y/L = A F(L, K/L, 1, N/L)

• Y/L = A F(L, K/L, H/L, 1)

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?

• both output and productivity

• output, but not productivity

• productivity, but not output

• neither productivity nor output

The catch-up effect refers to the idea that

• saving will always catch-up with investment spending

• it is easier for a country to grow fast and so catch-up if it starts out relatively poor

• population eventually catches-up with increased output

• if investment spending is low, increased saving will help investment to "catch-up."

If there are diminishing returns to capital, then

• capital produces fewer goods as it ages

• old ideas are not as useful as new ones

• increases in the capital stock eventually decrease output

• increases in the capital stock increase output by ever smaller amounts

Accumulating capital

• requires that society sacrifice consumption goods in the present

• allows society to consume more in the present

• decreases saving rates

• involves no tradeoffs

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

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

• for a grocery store, grocery carts and cash registers

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

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

Human capital is the term economists use to refer to the knowledge and skills that workers acquire

through education, training, and experience

• True

• False