Economics 2152A/B Lecture Notes - Production Function, Marginal Product

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cyanllama84

15 Nov 2012

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Real gdp = q = y = a x f (k,n) Note: y, k and n can be measured directly, but a can be calculated indirectly. The shape of the production function, y = a x k0. 3 x n0. 7. To show the production function graphically, we hold one of the 2 factors of production constant and graph the relationship between output and the other factor. If k = 1,798, y = 115. 75 (1,798)0. 3 then, y = 1,098 billions. Features of the production function: starts from the origin, slopes upward (positive), change in output due to a one unit change in capital. Marginal product of capital, mpk: slope of production factor which is mpk falls as k goes up (why?) This is called the principle of diminishing marginal product, this is 2nd derivative and should be negative. Average product of labour given y = 159. 20 n0. 7. Production function of an economy does not usually remain fixed over time.

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Question 1

The law of demand states that there is a direct relationship between supply and demand.

True

False

4 points

Question 2

Equilibrium is a state of balance between supply and demand.

True

False

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Question 3

Goods are scarce for both rich and poor.

True

False

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Question 4

"The big corporations in this country, like ExxonMobil and GM, have deep pockets and need to be hiring more people." This is a positive statement about economic policy.

True

False

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Question 5

The law of supply states that there is a direct relationship between price and quantity demanded.

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Question 6

In the circular flow model, firms own economic resources, and householdsbuy the manufactured products and services.

True

False

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Question 7

Households play a dual role of providing the factors of production whilepurchasing the goods and services of firms.

True

False

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Question 8

Opportunity cost is the lowest valued benefit that must be sacrificed asthe result of choosing an alternative.

True

False

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Question 9

Scarcity denotes that our desire for a good exceeds the amount that isfreely available from nature.

True

False

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Question 10

Economics is a social science concerned with satisfying man's unlimitedwants with limited resources.

True

False

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Question 11

Joint output of individuals or nations will be maximized when goods areexchanged between parties in accordance with the law of"comparative advantage".

True

False

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Question 12

The production possibilities frontier assumes that the level of technologyvaries when applying the model.

True

False

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Question 13

Excess demand in the market will cause the price of a product to decline.

True

False

4 points

Question 14

Demand is measured on the vertical axis and supply on the horizontalaxis.

True

False

4 points

Question 15

A change in quantity demanded is a movement along the same demandcurve.

True

False

4 points

Question 16

As globalization and world trade proliferates, individual markets withincountries' economies become more competitive.

True

False

4 points

Question 17

Which growth theory compares a subsistence real wage rate to the actual real wage rate?

		Classical growth theory
		Inflation growth theory
		Neoclassical growth theory
		New growth theory

4 points

Question 18

Suppose the working age population in Tiny Town is 100 people. If 25 of these people are NOT in the labor force, the ________ equals ________.

		unemployment rate; 25/100 Ã 100
		employment rate; 25/75 Ã 100
		labor force; 75
		labor force; 25/100 Ã 100

4 points

Question 19

Suppose there is a rise in the real wage rate. As a result, the quantity of labor demanded:

		increases.
		decreases.
		does not change because there is no change in the money wage rate.
		increases only if the price level also decreases.

4 points

Question 20

GDP can be computed as the sum of:

		all sales that have taken place in an economy over a period of time.
		the total expenditures of consumers and business over a period of time.
		the total expenditures of consumption, investment, and government expenditure on goods and services over a period of time.
		the total expenditures of consumption, investment, government expenditure on goods and services, and net exports over a period of time.

4 points

Question 21

The real wage rate equals:

		(100 x (money wage rate/price level)
		(100 x (price level/money wage rate)
		(money wage rate x (price level)
		(money wage + (number of hours worked/(price level)

4 points

Question 22

If the CPI was 121.5 at the end of 2007 and 138.3 at the end of 2008, the inflation rate over these two years was:

		10.2 percent.
		13.8 percent.
		12.2 percent.
		16.8 percent.

4 points

Question 23

A movement along the production function is the result of a change in:

		the quantity of labor.
		technology.
		capital.
		interest rates.

4 points

Question 24

All of the following are part of fiscal policy EXCEPT:

		setting tax rates.
		setting government spending.
		choosing the size of the government deficit.
		controlling the money supply.

4 points

Question 25

Along a production possibilities frontier for real GDP and the quantity of leisure time, as leisure time increases, real GDP:

		decreases.
		increases.
		stays the same.
		could increase, decrease or stay the same.

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Economics 2152A/B Lecture Notes - Production Function, Marginal Product

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