ECO 1102 Lecture Notes - Lecture 7: Diminishing Returns, Physical Capital, Production Function

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Y = real gdp = quantity of output produced. Standards of living: income per person: at a point in time and a re reflected in large differences in the quality of living. There are great differences across countries in living standards and growth rates. Productivity(cid:523) (cid:524): the average quantity(cid:523) (cid:524) of goods and services produced per hour of a worker"s time. Productivity (cid:523)output per unit of labour(cid:524) is the main determinant of living standards in the long run . Y/l = productivity (cid:523)output per worker(cid:524: when a nation"s workers are very productive, real gdp is large and incomes are high, when productivity growth rapidly, so do living standards. The stock of machinery, equipment and structures used to produce goods and services: k. Productivity is higher when the average workers has more capital. )ncrease in k/l causes an increase in y/l. The knowledge and skills workers acquire(cid:523) (cid:524) through education, training, and experience with expend(cid:523) (cid:524)

Related Questions

Use the following information to answer the next 2 questions: GDP per capita can be shown to equal average labor productivity times the proportion of the population that is employed (GDP/population= Y/L * L/population).

(a) The two factors that determine a nation's standard of living are: 1) the proportion of the population that works, and 2) its output per worker. The United States has an aging population and the proportion of the population that works is expected to decrease. Mexico has a relatively young population and, thus, the proportion of its population that works is expected to increase in the future. Given these circumstances, which of these two factors do you think is more relevant in each country for their standard of living? Explain your answer.

(b) Explain what happens with Econoland's total output (GDP) and its standard of living (as measured by GDP per capita) between 2014 and 2015, if we know the following information. The population of Econoland remains constant at 1,000 persons during both years. The number of employed workers increases from 400 in 2014 to 440 in 2015, but labor productivity, as measured by output per employed worker, decreases from $2,000 to $1,900 during the same time period. Show your derivations.

lemonlocust738

1) Which of the following things would increase the value of Total Factor Productivity (TFP)?

a. A new production method that can produce smaller, more efficient microchips.

b. None of the other answers.

c. A company hires a large amount of workers after building a brand new factory.

d. Foreign investors invest in physical capital.

2) The country of Rupertopia has one factory for all its workers in 2011 and 2012. There were 100 workers in 2011 and 150 workers in 2012. Additionally, there were 200 people living in Rupertopia in 2011 and 1,000 people in 2012. Real GDP was one million dollars in 2011 and two million dollars in 2012. Which of the following statements regarding labor productivity is true:

a. Labor productivity in Rupertopia exhibits constant returns.

b. Labor productivity in Rupertopia exhibits increasing returns.

c. Labor productivity in Rupertopia exhibits diminishing returns.

d. More information is needed to determine whether labor productivity in Rupertopia exhibits diminishing, constant, or increasing returns.

3) Which of the following changes would help to improve a country's productivity level?

a. Improvements in the health of workers

b. None of the other answers.

c. Tuition increases at local Universities

d. A lower birth rate

4) When workers already have a large quantity of capital to use in producing goods and services, giving them an additional unit of capital increases their productivity only slightly. This statement:

a. is an assertion that capital is subject to increasing returns.

b. is made under the assumption that the quantities of human capital, natural resources, and technology are being held constant.

c. represents an unconventional view of the production process.

d. All of the other answers are correct.

5) Economic growth can be influenced by government policies. Which of the following can influence the economy's growth rate?

a. All of the other answers are correct

b. Promoting research and development of technologies

c. Fostering education

d. Maintaining property rights

rosemanatee841

1. In a perfectly competitive industry, an individual firm faces:

a. a perfectly elastic labour supply curve

b. a perfectly inelastic labour supply curve

c.a perfectly vertical labour supply curve

d.none of the above

2. A firm purchases more capital equipment. We would expect to observe:

a. an increase in the supply of labour for this firm

b. a decrease in the supply curve of labour for this firm

c.an increase in the wage rate paid for labour by this firm

d.an increase in the demand for labour by this firm

3. Which of the following would be h most likely outcome if all perfectly competitive firms in a product market join together to form a monopoly?

a. the rate of output in the market will increase but the quantity of labour input will decrease

b.both the rate of output and the quantity of labour input employed will increase

c.the rate of output in the market will decrease but the quantity of labour input will increase

d.both the rate of output and the quantity of labour input employed will decrease

4. what does the marginal revenue product equal when 28 workers are hired in one week?

Labor input (workers per week)__Marginal physical product (output per week)__marginal revenue

25_______________________150_________________________________9.00

26_______________________140_________________________________8.50

27_______________________130_________________________________8.00

28_______________________120_________________________________7.50

29_______________________110________________________________7.00

a. $210

b.$7.50

c.$900

d.$1040

5. The profit-maximizing firm will hire additional workers until:

a. the extra revenue by the last workers hired equals zero

b.the extra cost associated with hiring the last worker equals the price of goods produced

c.the additional cost associated with hiring the last worker equals the average wage rate of workers

d.the additional cost associated with hiring the last worker equals the additional revenue generated by that worker.

rosehyena631

ECO 1102 Lecture Notes - Lecture 7: Diminishing Returns, Physical Capital, Production Function

ECO 1102 Full Course Notes

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