ECON 1BB3 Chapter Notes - Chapter 8-10: Unemployment, Four Asian Tigers, Potential Output

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11 Dec 2016

School

McMaster University

Department

Economics

Course

ECON 1BB3

Professor

Bridget O' Shaughnessy

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ECON 1BB3 Full Course Notes

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Economic growth: increase in the amount and quality of resources, improvements in technology, improvements in the rules of the game . The quantity of goods and services produced by a unit of input. Economists are most concerned with labour productivity, because it makes up about ~ 60% of production costs. Shows how we combine inputs to produce output. Y is real gdp, a is technology,k is physical capital, l is labour, h is human capital, n is natural resources. Also represented in per capita terms ( y/l = axf(k/l,h/l,p/l) - productivity goes up when each worker has more capital to use, more time spent studying, and when workers have more natural resources to use. This means as we add capital per worker, output is increased but a slower rate (slope decreases). The function shifts when there is advancement in technology or rules of the game. Since 1970 most of the worlds productivity has rebounded after falling, but.

Related Questions

The opportunity cost of one more slice of pizza in terms of sodas is the

		the total number of pizza slices that we have divided by the total number of sodas that we have.
		the number of sodas we have to give up to get one extra pizza slice.
		the number of pizza slices we have to give up to get one extra soda.
		the total number of sodas that we have divided by the total number of pizza slices that we have.

1 point

QUESTION 2

A production possibilities frontier shows

		how money can be allocated among two kinds of goods.
		the limits to the future growth of a nation.
		the various combinations of output a nation can produce at a certain time, given its available resources and technology.
		that if the price of one good decreases, the price of the other has to increase.

1 point

QUESTION 3

When a production possibilities frontier is bowed outward, as more of one good is produced, its opportunity cost

		remains constant.
		might increase, decrease, or remain constant depending on how much people value the additional units of the good.
		increases.
		decreases.

1 point

QUESTION 4

When all of the available factors of production are being efficiently employed, the

		the economy is producing at a point within its PPF.
		PPF disappears.
		the economy is producing at a point beyond its PPF.
		the economy is producing at a point on its PPF.

1 point

QUESTION 5

If a nation devotes a larger share of its current production to consumer goods, then

		its PPF will shift inward.
		its economic growth will slow down.
		its PPF will shift outward.
		some productive factors will become unemployed.

1 point

QUESTION 6

A point on the production possibilities frontier reflects an

		the attainable point with full employment of all resources.
		attainable point without full employment of all resources.
		unattainable point without full employment of all resources.
		the unattainable point with full employment of all resources.

1 point

QUESTION 7

When drawing a production possibilities frontier, which of the following is held constant?

		the available factors of production and the state of technology
		the amount of money in the economy
		the prices of goods and services
		the quantity of the goods and services that are produced

1 point

QUESTION 8

As we move along the production possibilities frontier,

		more of both goods can be produced.
		the possibilities of tradeoffs diminish.
		a tradeoff is not possible because nations need all goods.
		the production of one good increases as the production of the other good decreases.

1 point

QUESTION 9

Which of the following is an assumption used when drawing a production possibilities frontier?

i.Human wants and desires are limited to what is available.

ii. Only two goods are considered.

iii. The level of technology is fixed and unchanging.

		I and iii
		ii only
		I, ii, and iii
		I only

1 point

QUESTION 10

To achieve gains from trade, a country

		needs to have an absolute advantage in the production of all goods.
		specializes in producing a good in which it has a lower opportunity cost.
		must produce at a point beyond its PPF.
		should produce at the midpoint of its PPF.

1 point

QUESTION 11

Relative to Al, Joe has ________ if Joe can produce a good at a lower opportunity cost than Al.

		a comparative advantage
		more production efficiency
		a marginal benefit
		a comparative benefit

1 point

QUESTION 12

Does economic growth depend upon which of the following?

i.Improving the quality of labor

ii. Technological advancement

iii. Increasing the amount of capital

		iii only
		ii only
		I only
		I, ii, and iii

1 point

QUESTION 13

In one hour John can produce 20 loaves of bread or 18 cakes. In one hour Phyllis can produce 30 loaves of bread or 15 cakes. Which of the following statements is true?

		John has a comparative advantage in producing cakes.
		Phyllis has an absolute advantage in both goods.
		Phyllis has a comparative advantage in producing cakes.
		John has an absolute advantage in both goods.

1 point

QUESTION 14

As an economy produces more of one of the goods on a bowed out production possibilities frontier, what happens to the opportunity cost of producing the good?

		It decreases.
		It might increase, decrease, or remain constant depending on how much people value the additional units of the good.
		It remains constant.
		It increases.

1 point

QUESTION 15

The production possibilities frontier illustrates the

		goods and services that people want.
		maximum combinations of goods and services that can be produced.
		resources the economy possesses, but not it is the level of technology.
		limits to people's wants.

1 point

QUESTION 16

The United States produced approximately ________ worth of goods and services in 2007.

		$14 billion
		$14 trillion
		$140 billion
		$140 trillion

1 point

QUESTION 17

The fact of increasing opportunity cost when moving on the PPF means that

		to increase the production of one product requires smaller and smaller sacrifices of the other good.
		to decrease the production of one product requires smaller and smaller sacrifices of the other good.
		to increase the production of one product requires larger and larger sacrifices of the other good.
		when the government forces a movement from one point on the PPF to another point, no production is lost.

1 point

QUESTION 18

Other things equal, if India devotes more resources to educate its population than China,

		China will grow faster than India.
		India will be able to eliminate scarcity faster than China.
		India will be able to eliminate opportunity cost faster than China.
		India will grow faster than China.

1 point

QUESTION 19

For Ireland to grow more potatoes, wool production must decrease. This situation is an example of

		zero opportunity cost.
		producing at a point that lies beyond the PPF.
		opportunity benefit.
		a tradeoff.

1 point

QUESTION 20

Moving from one point to another on a production possibilities frontier implies

		increasing the production of both goods.
		increasing the production of one good and decreasing the production of another.
		holding the production levels of both goods constant.
		decreasing the production of both goods.

1 point

QUESTION 21

The United States is one of the richest nations in the world,

		but it can still benefit from specialization and trade.
		so does not need to trade with poor nations to achieve any gains from trade.
		so might not have a comparative advantage in producing any goods.
		so it must have a comparative advantage in the production of all goods.

1 point

QUESTION 22

"Comparative advantage" is defined as a situation in which one person can produce

		more of all goods than another person.
		a good for a lower opportunity cost than another person.
		a good for a lower dollar cost than another person.
		more of a good than another person.

1 point

QUESTION 23

The idea of increasing opportunity cost is reflected in the

		the linear shape of the production possibilities frontier.
		bowed in the shape of the production possibilities frontier.
		bowed out the shape of the production possibilities frontier.
		the positive slope of the production possibilities frontier.

1 point

QUESTION 24

Suppose that after specializing according to comparative advantage, a country is trading with another nation that also specializes according to its comparative advantage. Which of the following statements are true for the first country?

i)It enjoys gains from trade.

ii)It must have an absolute advantage in the production of the good it produces.

iii)It is producing at a point beyond its PPF.

		I only.
		I and ii.
		I and iii.
		ii and iii.

1 point

QUESTION 25

If society moves from a period of time with significant unemployment to a time with full employment, its production possibilities frontier will

		shift rightward.
		not shift because the society moves from one point on the frontier to a point inside the frontier.
		not shift because the society moves from a point inside the frontier to a point on the frontier.
		shift leftward.

1 point

ochresea-lion6

Part I. Multiple Choice Questions. Please circle the right answer (one mark each)

1. Which of the following are economic goods?

a. Atlantic Ocean sea water.

b. Iowa farm land.

c. California coast line.

d. All of the above.

e. All of the above, except a.

2. The three fundamental questions of economic organization are:

a. closely related to the concept of scarcity.

b. not nearly as important today as they were at the dawn of civilization.

c. what, how, and why.

d. land, labor, and capital.

e. all of the above.

3. Which of the following statements applies to a mixed economy?

a. There is confusion and a lack of organization.

b. The allocation of resources changes from production period to production period.

c. There are no real examples of truly mixed economies.

d. Mixed economies include aspects of both market and command economies.

e. None of the above statements apply.

4. Capital is:

a. the same as money.

b. the headquarters of economic planning.

c. both an input and an output.

d. all of the above.

e. none of the above.

5. Land, labor, and capital are:

a. available only in finite amounts.

b. used to produce outputs.

c. the primary factors of production.

d. combined with technology in the production process.

e. all of the above.

6. Which of the statements below does not apply to the production-possibility frontier, or PPF?

a. The PPF is closely related to the concept of scarcity.

b. Quantities of inputs are measured along the axes of the PPF.

c. The PPF may shift over time.

d. Movements along the PPF may occur as the allocation of resources changes.

e. Technology may change the shape of the PPF.

7. Which of the statements below is a reason why an economy might produce a level of output that is beneath its production-possibility frontier?

a. The available resources are not equally suited to the production of both outputs.

b. The available body of technological knowledge is not being fully utilized.

c. Society prefers one product over the other.

d. In reality, economies produce thousands of goods not just two.

e. There are no frontiers left anymore.

8. In order to shift the PPF out (above and to the right), an economy would have to:

a. somehow increase its stock of inputs.

b. remove some incompetent bureaucrats from their jobs.

c. eliminate the sources of significant abuse of monopoly power.

d. all of the above.

e. none of the above.

9. Sana notices that no matter how many paper cups she buys, she always pays the same price per cup. This means that the supply curve which confronts her is:

a. perfectly inelastic.

b. perfectly elastic.

c. unit-elastic.

d. elastic, but not necessarily perfectly elastic.

e. none of these things, necessarily

10. A perfectly inelastic supply curve would be shown in the ordinary supply-and-demand graph as a:

a. vertical line.

b. horizontal line.

c. straight line, but neither horizontal nor vertical.

d. curved line.

e. any of the above.

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

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ECON 1BB3 Chapter Notes - Chapter 8-10: Unemployment, Four Asian Tigers, Potential Output

ECON 1BB3 Full Course Notes

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