ECON 104 Chapter Notes - Chapter 7: Diminishing Returns, Human Capital, Foreign Direct Investment

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lemonimpala602

4 Apr 2016

School

University of Victoria

Department

Economics

Course

ECON 104

Professor

Zhang Lijun

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Document Summary

Producivity: the quanity of goods and services produced from each hour of a worker"s ime. Producivity is the key determinant in living standards and growth of producivity is the key determinant in the growth of living standards. The stock of equipment and structures that are used to produce goods and services: human capital: The knowledge and skills that workers acquire through educaion, training, and experience: natural resources: The inputs into the producion of goods and services that are provided by nature. Ex: land, rivers, mineral deposits, etc: technological knowledge: Society"s understanding of the best ways to produce goods and services. Clariicaion: technological knowledge refers to society"s understanding about how the world works, while human capital refers to the resources expended transmiing this knowledge to the labour force. Y = af( l , k , h , n ) F ( ): a funcion that shows how the inputs are combined to produce output.

Related Questions

The opportunity cost of going to college is almost never discussed, yet it is quite high, so high that it is seriously impacting the broader American economy. For non-economists, âopportunity costâ is one of the most important concepts in economics. Because of scarcity we only have limited resources, and when we use those resources to do something like go to college, we cannot use them for other things that we also believe are desirable.

By far the most important resource we use in producing goods and services is labor or âhuman capital.â Based on what we pay owners of resources, we can say that roughly two-thirds of all production of goods and services is attributable to direct human effort â work. When kids go to college, they forego entering the labor force in a major, full-time manner. When six or seven percent of the entire American population is in college, that means a significant reduction in work effort occurs because otherwise highly productive persons in the physical prime of their lives are only lightly utilized in making things or providing services.

Today, only slightly over 59 of every 100 Americans of working age actually work, down from almost 66 in 2000. If we had the employment-population ratio of 15 years ago, we would have at least 16 million more working Americans today â an increase of over 10 percent. Our output would be probably the better part of a trillion dollars higher. The push for âcollege for allâ is one reason we have less work effort today (to be sure, the modern welfare state has also lowered work incentives a lot for other reasons).

The college for all crowd says higher education augments oneâs human capital, and we forego output today from working to bolster output tomorrow from more productive workers. And, no doubt, that is sometimes true. We have many productive engineers and accountants who gained important skills in college, for example. But is that necessarily true of all college graduates, particularly when Arum and Roksa tell us that graduating college seniors typically have only marginally better critical reasoning skills that freshman? And when over 40 percent of those entering four year colleges fail to graduate in six years? What if millions of those who do graduate take jobs similar to those without that college education? What if the debt incurred to pay for the college leads many to delay marrying, delay buying houses? There is evidence that to some extent the push for college has led to all of these unintended consequences.

The Federal Reserve Bank of New York has published great work showing that there is a very severe underemployment problem amongst college graduates, and other equally good research demonstrating what many of us have been saying for years: the student financial aid programs such as subsidized student loans, have pushed up the cost of college. Now a sister Federal Reserve Bank, namely Philadelphia, is jumping into the act.

The Philly Fed in a new study shows that high student loan debt is preventing young potential entrepreneurs from starting new businesses â they cannot afford the necessary debt. Opportunity cost again: if I borrow a lot to go to college, I cannot afford to borrow to start a business.

Enrollment in all forms of higher education today are up roughly 50 percent or seven million from what they were in 1990. What if enrollments had only risen proportionate to population growth â we would have three or four million fewer enrolled in college today. Would our nation be better or worse off? No one knows for sure, but the continued rise in the proportion of Americans with a college education has been accompanied by a sharp reduction in the rate of economic growth. I bet we would have fewer underemployed recent graduates. I bet we would have less than 17 percent delinquency rates on college loans, and far less than a trillion dollars in loan debt. I bet we would have a higher rate of labor force involvement and entrepreneurial activity among the young. And I bet we would be spending tens of billions less on higher education, and at least a little bit more on capital goods investment, highway construction, et cetera. In short, I suspect we would have been better off as a nation.

Richard Vedder directs the Center for College Affordability and Productivity, teaches at Ohio University, and is an Adjunct Scholar at the American Enterprise Institute.

Question :

This is a short article discussing the concept of opportunity cost and college. Provide your views on this topic.Do you agree/disagree with the article? Why? What are your thoughts on the current employment landscape of college graduates? Provide any insight on this topic on a specific industry, your own experience, or the experiences of people that you know who have already graduated.

magentalion418

The primary costs of FDI to host countries are:

		Loss of sovereignty and patriotism
		Adverse effects on competition and exports
		Capital outflow
		Loss of sovereignty, adverse effects on competition, and capital outflow

____ suggests that FDI, unrestricted by government intervention, will enable countries to tap into their absolute or comparative advantage by specializing in the production of certain goods or services.

		The radical view
		The free market view
		Pragmatic nationalism
		Expropriation

What are the benefits of FDI to home countries?

		Repatriated earnings from profits from FDI.
		Increased exports of components and services to host countries.
		Learning via FDI from operations abroad.
		All of these answers

When one firm enters a foreign country through FDI, its rivals are likely to follow by undertaking additional FDI in a host country to:

		Create knowledge spillover
		Discover a new market for its goods
		Overcome and combat market failure through FDI
		Acquire location advantages or neutralize the first moverâs location advantages

Most countries practice:

		Pragmatic nationalism
		Free market based FDI
		Government embracing radical view
		French patriotism

FDI may be viewed as a reflection of firm motivation to extend firm-specific capabilities abroad and their responses to overcome imperfections and failures.

		True
		False

Most countries practice a totally "free market" view.

		True
		False

8. Outsourcing is the process of turning over an organizational activity to an outside supplier, located in a foreign country, which will perform it on behalf of the local firm.

		True
		False

Financial, physical, and technological resources and capabilities are all tangible assets.

		True
		False

A firm's resources and capabilities are tangible assets a firm uses to choose and implement its strategies.

		True
		False

An example of low power distance would be when subordinates address their bosses on a first-name basis.

		True
		False

Benchmarking is an assessment as to whether a firm has resources and capabilities to perform a particular activity in a manner superior to competitors.

		True
		False

A country with low-masculinity has a more subtle differentiation between the gender roles.

		True
		False

Setting up subsidiaries abroad so the work can be performed in-house but in the foreign location is also called captive sourcing.

		True
		False

Managers in low uncertainty avoidance countries rely more on experience and training than managers in high uncertainty avoidance countries who rely more on rules.

		True
		False

Informal institutions include laws, regulations, and rules.

		True
		False

The United States is often classified as a collective society.

		True
		False

A pure market economy characterized by the "invisible hand" of market forces is noted by

		John Stuart Mill
		Adam Smith
		Aristotle
		Amatya Zen

Culture is defined in the text as:

		The communication between members of similar location.
		The collective programming of the mind, which distinguishes the members of one group or category of people from another.
		The main component of formal institutions.
		The attitudes and behaviors characteristic of a particular social group or organization.

When an expat employee returns to her or his current employer but the employer does not provide attractive opportunities, she/he often may be hired by a competitor firm. Why?

		Competitor firms are also interested in globalizing their business.
		Former expats bring instant expertise and experience.
		Competing firms will pay a higher premium for expertise.
		All of these answers

The government taking a "hands-off approach" is known as:

		Laissez faire
		Command economy
		Mixed economy
		Liberal approach

Expatriate managers make ideal candidates for top management positions.

		True
		False

____ are defined as rights associated with the ownership of intellectual property.

		Patents
		Copyrights
		Trademarks
		Intellectual property rights

In a collective society:

		Family units are highly valued.
		Being an entrepreneur is a popular mindset
		Being different than your neighbor is important.
		Outsiders are easily trusted.

Which of the following definitions best defines an expatriate manager?

		A manager who works outside his or her native country
		A manager of great expertise
		An ex-manager rehired for advisory purposes
		None of these answers

ECON 104 Chapter Notes - Chapter 7: Diminishing Returns, Human Capital, Foreign Direct Investment

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