Question 1

Suppose than an economy has output Y = AK0.3L0.7, that Y equals $12 trillion, capital K is $27 trillion, and labor L is 64 million workers. Given this information, what is the closest approximation of total factor productivity A?

Accepted Answer

A)   less than 0.01
B)   around 0.25
C)   roughly 0.33
D)   close to 0.4
E)   exactly 144

Question 2

An economy's total labor income is $2 trillion, and total capital income is $1 trillion. In the Cobb-Douglas production function, the exponent on capital is ________.

Accepted Answer

A)   two thirds
B)   one half
C)   one third
D)   0.3
E)   none of the above

Question 3

Suppose that reduced barriers to international financial transactions cause an increase in the economy's supply of capital. Explain, step-by-step, how the economy adjusts to arrive at a new long-run equilibrium.

Accepted Answer

The increase in the supply of capital (r...

Question 4

An example of a supply shock could be ________.

Accepted Answer

A)   a technological innovation
B)   a natural disaster
C)   an oil price increase
D)   all of the above
E)   none of the above

Question 5

Economic profits differ from accounting profits because ________.

Accepted Answer

A)   the former is calculated by economists and the latter by accountants
B)   many firms own their own capital so accounting profits do not factor this cost
C)   most firms report economic profits once a year and accounting profits every pay period
D)   all of the above
E)   none of the above

Question 6

Equilibrium market prices for capital and labor are $10 and $8, respectively. Then, the economy experiences one or more supply shocks, so that the marginal product of capital is $12, and the marginal product of labor is $9. Assuming that the available quantities of capital and labor are fixed, which of the following is (are)  likely to decrease as the economy approaches its new equilibrium?

Accepted Answer

A)   real rental price of capital
B)   total output
C)   economic profits
D)   the quantity of capital in use
E)   none of the above

Question 7

The marginal product of capital (MPK)  can be calculated from the following ________.

Accepted Answer

A)   the capital share of income and the average output per unit of capital
B)   the capital share of income and average capital per worker
C)   output and capital
D)   the capital share of income and output
E)   none of the above

Question 8

A ten percent increase in total factor productivity A will increase ________.

Accepted Answer

A)   the marginal product of capital (MPK)  by ten percent
B)   the marginal product of labor (MPL)  by ten percent
C)   output by ten percent
D)   all of the above
E)   none of the above

Question 9

As the capital stock increases,________. This means that the marginal product of capital (MPK) ________.

Accepted Answer

A)   the slope of the production function falls; declines
B)   the slope of the production function increases; goes up
C)   the slope of the production function falls; goes up
D)   the slope of the production function increases; declines
E)   none of the above

Question 10

Firms will continue to increase their purchase of factor inputs as long as ________.

Accepted Answer

A)   the marginal product of a given factor is greater than its real factor price
B)   the marginal cost of a given factor is lower than its marginal product
C)   their total revenues are greater than their total costs
D)   all of the above
E)   none of the above

Question 11

Key determinants of economic profit include ________.

Accepted Answer

A)   the revenue from selling goods and services
B)   the cost incurred in buying capital
C)   the cost of hiring labor
D)   all of the above
E)   none of the above

Question 12

As the amount of labor input increases ________. This means that the marginal product of labor (MPL) ________.

Accepted Answer

A)   the slope of the production function increases; goes up
B)   the slope of the production function falls; declines
C)   the slope of the production function falls; goes up
D)   the slope of the production function increases; declines
E)   none of the above

Question 13

Assume that an economy is in equilibrium when technological progress causes an increase in total factor productivity. Once the economy has adjusted to its new equilibrium, and assuming that the supplies of capital and labor remain unchanged, which of the following has increased?

Accepted Answer

A)   the real wage
B)   the share of capital income in national income
C)   the share of labor income in national income
D)   all of the above
E)   none of the above

Question 14

The marginal product of labor (MPL)  measures ________.

Accepted Answer

A)   by how much labor increases for each additional unit of output
B)   by how much labor increases for each additional unit of capital
C)   by how much total factor productivity increases for each additional unit of labor
D)   by how much labor increases for each additional unit of productivity
E)   by how much output increases for each additional unit of labor

Question 15

Which of the following will cause an increase in the marginal product of capital (MPK) ?

Accepted Answer

A)   a decrease in the quantity of labor in use
B)   an increase in labor productivity
C)   a decrease in the quantity of capital in use
D)   all of the above
E)   none of the above

Question 16

An economy's production function is Y = AK0.3L0.7, and the economy's total output in equilibrium is $700 billion. Total labor income in this economy is ________.

Accepted Answer

A)   $300 billion
B)   $233.3 billion
C)   $210 billion
D)   $400 billion
E)   none of the above

Question 17

The marginal product of labor (MPL)  can be calculated from the following ________.

Accepted Answer

A)   the labor share of income and the average output per unit of labor
B)   the labor share of income and average labor per worker
C)   output and labor
D)   the labor share of income and output
E)   none of the above

Question 18

Suppose a government tried to mandate a real wage above the equilibrium real wage. Assuming that factor markets are otherwise free and competitive, explain why the higher real wage would fail to increase the share of labor income in national income.

Accepted Answer

Given the Cobb-Douglas production functi...

Question 19

The marginal product of capital (MPK)  is given by the ________.

Accepted Answer

A)   capital share of income + average output per unit of capital
B)   capital share of income - average output per unit of capital
C)   capital share of income ÷ average output per unit of capital
D)   capital share of income × average output per unit of capital
E)   none of the above

Question 20

Given the production function Y = AKαL1-α, if the rental price of capital is 0.133, Y = 690, and K = 1,728, what is the value of the exponent α? If A = 1, and the real wage is 1.15, is this economy in a long-run equilibrium?

Accepted Answer

Since the rental price of capital equals...

Exam 3: Aggregate Production and Productivity

An example of a supply shock could be ________.

Correct Answer
verified

As the capital stock increases,. This means that the marginal product of capital (MPK) .

Correct Answer
verified

Suppose that reduced barriers to international financial transactions cause an increase in the economy's supply of capital. Explain, step-by-step, how the economy adjusts to arrive at a new long-run equilibrium.

Correct Answer
verified
The increase in the supply of capital (r...
View Answer

Firms will continue to increase their purchase of factor inputs as long as ________.

Correct Answer
verified

As the amount of labor input increases . This means that the marginal product of labor (MPL) .

Correct Answer
verified

Correct Answer
verified

The marginal product of capital (MPK) can be calculated from the following ________.

Correct Answer
verified

Suppose a government tried to mandate a real wage above the equilibrium real wage. Assuming that factor markets are otherwise free and competitive, explain why the higher real wage would fail to increase the share of labor income in national income.

Correct Answer
verified
Given the Cobb-Douglas production functi...
View Answer

The marginal product of labor (MPL) measures ________.

Correct Answer
verified

Economic profits differ from accounting profits because ________.

Correct Answer
verified

Suppose than an economy has output Y = AK0.3L0.7, that Y equals $12 trillion, capital K is $27 trillion, and labor L is 64 million workers. Given this information, what is the closest approximation of total factor productivity A?

Correct Answer
verified

An economy's total labor income is $2 trillion, and total capital income is $1 trillion. In the Cobb-Douglas production function, the exponent on capital is ________.

Correct Answer
verified

A ten percent increase in total factor productivity A will increase ________.

Correct Answer
verified

Assume that an economy is in equilibrium when technological progress causes an increase in total factor productivity. Once the economy has adjusted to its new equilibrium, and assuming that the supplies of capital and labor remain unchanged, which of the following has increased?

Correct Answer
verified

The marginal product of labor (MPL) can be calculated from the following ________.

Correct Answer
verified

Key determinants of economic profit include ________.

Correct Answer
verified

Given the production function Y = AKαL1-α, if the rental price of capital is 0.133, Y = 690, and K = 1,728, what is the value of the exponent α? If A = 1, and the real wage is 1.15, is this economy in a long-run equilibrium?

Correct Answer
verified
Since the rental price of capital equals...
View Answer

Which of the following will cause an increase in the marginal product of capital (MPK) ?

Correct Answer
verified

The marginal product of capital (MPK) is given by the ________.

Correct Answer
verified

An economy's production function is Y = AK0.3L0.7, and the economy's total output in equilibrium is $700 billion. Total labor income in this economy is ________.

Correct Answer
verified

Exam 3: Aggregate Production and Productivity

An example of a supply shock could be ________.

Correct AnswerverifiedShow Answer

As the capital stock increases,________. This means that the marginal product of capital (MPK) ________.

Correct AnswerverifiedShow Answer

Suppose that reduced barriers to international financial transactions cause an increase in the economy's supply of capital. Explain, step-by-step, how the economy adjusts to arrive at a new long-run equilibrium.

Correct AnswerverifiedThe increase in the supply of capital (r...View AnswerShow Answer

Firms will continue to increase their purchase of factor inputs as long as ________.

Correct AnswerverifiedShow Answer

As the amount of labor input increases ________. This means that the marginal product of labor (MPL) ________.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The marginal product of capital (MPK) can be calculated from the following ________.

Correct AnswerverifiedShow Answer

Suppose a government tried to mandate a real wage above the equilibrium real wage. Assuming that factor markets are otherwise free and competitive, explain why the higher real wage would fail to increase the share of labor income in national income.

Correct AnswerverifiedGiven the Cobb-Douglas production functi...View AnswerShow Answer

The marginal product of labor (MPL) measures ________.

Correct AnswerverifiedShow Answer

Economic profits differ from accounting profits because ________.

Correct AnswerverifiedShow Answer

Suppose than an economy has output Y = AK0.3L0.7, that Y equals $12 trillion, capital K is $27 trillion, and labor L is 64 million workers. Given this information, what is the closest approximation of total factor productivity A?

Correct AnswerverifiedShow Answer

An economy's total labor income is $2 trillion, and total capital income is $1 trillion. In the Cobb-Douglas production function, the exponent on capital is ________.

Correct AnswerverifiedShow Answer

A ten percent increase in total factor productivity A will increase ________.

Correct AnswerverifiedShow Answer

Assume that an economy is in equilibrium when technological progress causes an increase in total factor productivity. Once the economy has adjusted to its new equilibrium, and assuming that the supplies of capital and labor remain unchanged, which of the following has increased?

Correct AnswerverifiedShow Answer

The marginal product of labor (MPL) can be calculated from the following ________.

Correct AnswerverifiedShow Answer

Key determinants of economic profit include ________.

Correct AnswerverifiedShow Answer

Given the production function Y = AKαL1-α, if the rental price of capital is 0.133, Y = 690, and K = 1,728, what is the value of the exponent α? If A = 1, and the real wage is 1.15, is this economy in a long-run equilibrium?

Correct AnswerverifiedSince the rental price of capital equals...View AnswerShow Answer

Which of the following will cause an increase in the marginal product of capital (MPK) ?

Correct AnswerverifiedShow Answer

The marginal product of capital (MPK) is given by the ________.

Correct AnswerverifiedShow Answer

An economy's production function is Y = AK0.3L0.7, and the economy's total output in equilibrium is $700 billion. Total labor income in this economy is ________.

Correct AnswerverifiedShow Answer

Correct Answer
verified

As the capital stock increases,. This means that the marginal product of capital (MPK) .

Correct Answer
verified

Correct Answer
verified
The increase in the supply of capital (r...
View Answer

Correct Answer
verified

As the amount of labor input increases . This means that the marginal product of labor (MPL) .

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
Given the Cobb-Douglas production functi...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
verified
Since the rental price of capital equals...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified