Chapter 25 /Production and Growth ? 1713
81. In the country of Suchnott, the price of silver increased from $30 per ounce to $32 per ounce during a time
when the overall price level increased by 5 percent. During this period, the real price of silver a. increased. b. decreased.
c. stayed the same.
d. might have increased, decreased or stayed the same; more information is needed to be sure.
ANS: A
NAT: Analytic TOP: Prices DIF: 2 REF: 25-2
LOC: Scarcity, tradeoffs, and opportunity cost MSC: Applicative
82. Suppose over the last year that the price of recycled aluminum increased from $800 a ton to $900 a ton. Over
the same time a measure of the overall price level increased from 120 to 130. The price of recycled aluminum increased by
a. less than inflation, but this doesn’t necessarily mean it became scarcer. b. less than inflation, and this means it became scarcer. c. more than inflation, and this means it became scarcer.
d. more than inflation, but this doesn’t necessarily mean that it become scarcer.
ANS: C DIF: 2 REF: 25-2 NAT: Analytic LOC: Scarcity, tradeoffs, and opportunity cost TOP: Prices | Scarcity MSC: Applicative
83. Suppose over the last year that the price of iron ore increased from $1,200 a ton to $1,300 a ton. Over the same
time a measure of the overall price level increased from 168 to 187. The price of iron ore increased by a. less than inflation, and this means it became relatively less scarce. b. less than inflation, and this means it became scarcer. c. more than inflation, and this means it became scarcer.
d. more than inflation, but this doesn’t necessarily mean that it become scarcer.
ANS: A DIF: 2 REF: 25-2 NAT: Analytic LOC: Scarcity, tradeoffs, and opportunity cost TOP: Prices | Scarcity MSC: Applicative
84. After adjusting for inflation, over time the prices of most natural resources have been
a. steady or falling, meaning that our ability to conserve them is growing more rapidly than their
supplies are dwindling.
b. steady or falling, meaning that their supplies are dwindling more rapidly than our ability to
conserve them is growing.
c. rising, meaning that our ability to conserve them is growing more rapidly than their supplies are
dwindling.
d. rising, meaning that their supplies are dwindling more rapidly than our ability to conserve them is
growing.
ANS: A DIF: 1 REF: 25-2 NAT: Analytic LOC: Scarcity, tradeoffs, and opportunity cost TOP: Natural resources | Prices MSC: Interpretive
85. Proprietary technology is knowledge that is
a. known but no longer used much. b. known, but only recently discovered.
c. known mostly by only those in a certain profession. d. known only by the company that discovered it.
ANS: D
NAT: Analytic TOP: Technology DIF: 1 REF: 25-2
LOC: The Study of economics, and definitions of economics MSC: Definitional
1714 ? Chapter 25 /Production and Growth
86. Proprietary technology is technology that is
a. widely used because it is easy to learn.
b. widely used because the government subsidizes its use.
c. not widely used because people could, but have not, taken the time to learn how to apply it. d. not widely used because it is known or controlled only by the company that discovered it.
ANS: D
NAT: Analytic TOP: Technology DIF: 1 REF: 25-2
LOC: The Study of economics, and definitions of economics MSC: Definitional
87. A management professor discovers a way for corporate management to operate more efficiently. He publishes
his findings in a journal. His findings are a. proprietary and common knowledge.
b. neither proprietary nor common knowledge. c. proprietary, but not common, knowledge. d. common, but not proprietary, knowledge.
ANS: D
NAT: Analytic TOP: Technology DIF: 1 REF: 25-2
LOC: The Study of economics, and definitions of economics MSC: Definitional
88. Your company discovers a better way to produce mousetraps, but your better methods are not apparent from
the mousetraps themselves. Your knowledge of how to more efficiently produce mousetraps is a. common technological knowledge.
b. common, but not technological, knowledge. c. proprietary technological knowledge.
d. proprietary, but not technological, knowledge.
ANS: C
NAT: Analytic TOP: Technology DIF: 1 REF: 25-2
LOC: The Study of economics, and definitions of economics MSC: Definitional
89. Technological knowledge refers to
a. human capital.
b. available information on how to produce things.
c. resources expended transmitting society's understanding to the labor force. d. All of the above are technological knowledge.
ANS: B
NAT: Analytic TOP: Technology DIF: 2 REF: 25-2
LOC: The Study of economics, and definitions of economics MSC: Interpretive
90. Thomas Edison received patents on many of his inventions. While the patents existed, his ideas were
a. public goods and proprietary knowledge. b. public goods but not proprietary knowledge. c. private goods and proprietary knowledge. d. private goods but not proprietary knowledge.
ANS: C
NAT: Analytic TOP: Technology DIF: 2 REF: 25-2
LOC: The Study of economics, and definitions of economics MSC: Interpretive
91. The relationship between the quantity of output created and the quantity of inputs needed to create it is called
a. the capital accumulation function. b. technological knowledge. c. the production function. d. human capital.
ANS: C DIF: 1 REF: 25-2 NAT: Analytic LOC: The Study of economics, and definitions of economics TOP: Production function MSC: Definitional
Chapter 25 /Production and Growth ? 1715
92. An understanding of the best ways to produce goods and services is called
a. human capital. b. physical capital. c. technology. d. productivity.
ANS: C
NAT: Analytic TOP: Technology DIF: 1 REF: 25-2
LOC: The Study of economics, and definitions of economics MSC: Definitional
93. Suppose that over the last ten years productivity grew faster in Oceania than in Freedonia and the population
of both countries was unchanged.
a. It follows that real GDP per person must be higher in Oceania than in Freedonia. b. It follows that real GDP per person grew faster in Oceania than in Freedonia. c. It follows that the standard of living must be higher in Oceania than in Freedonia. d. All of the above are correct.
ANS: B
NAT: Analytic MSC: Applicative
DIF: 2 REF: 25-2 LOC: Productivity and growth TOP:
Productivity | Real GDP
94. Suppose that real GDP grew more in Country A than in Country B last year.
a. Country A must have a higher standard of living than country B. b. Country A's productivity must have grown faster than country B's. c. Both of the above are correct. d. None of the above is correct.
ANS: D DIF: 3 REF: 25-2 NAT: Analytic LOC: Productivity and growth TOP: Productivity | Standard of living MSC: Analytical95. Which of the following would increase productivity?
a. an increase in the physical capital stock per worker b. an increase in human capital per worker c. an increase in natural resources per worker d. All of the above are correct.
ANS: D
NAT: Analytic MSC: Interpretive
DIF: 1 REF: 25-2 LOC: Productivity and growth TOP:
Productivity
96. Which of the following would, by itself, reveal the most about a country’s standard of living?
a. its level of capital
b. the number of hours worked
c. its availability of natural resources d. its productivity
ANS: D DIF: 2 REF: 25-2 NAT: Analytic LOC: Productivity and growth TOP: Productivity | Standard of living MSC: Interpretive97. Human capital is
a. the same thing as technological knowledge. b. the same thing as labor.
c. the tools and equipment operated by humans. d. knowledge and skills that workers have acquired.
ANS: D
NAT: Analytic MSC: Definitional
DIF: 1 REF: 25-2 LOC: Productivity and growth TOP:
Human capital
1716 ? Chapter 25 /Production and Growth
98. Suppose a country imposes new restrictions on how many hours people can work. If these restrictions reduce
the total number of hours worked in the economy, but all other factors that determine output are held fixed, then
a. productivity and output both rise. b. productivity rises and output falls. c. productivity falls and output rises. d. productivity and output fall.
ANS: B
NAT: Analytic MSC: Analytical
DIF: 3 REF: 25-2 LOC: Productivity and growth TOP:
Productivity
99. Which of the following would be considered physical capital?
a. the available knowledge on how to make semiconductors b. a taxi-cab driver’s knowledge of the fastest routes to take c. bulldozers, backhoes and other construction equipment d. All of the above are correct.
ANS: C
NAT: Analytic MSC: Interpretive
DIF: 2 REF: 25-2 LOC: Productivity and growth TOP:
Physical capital
100. Other things the same, which of the following could explain an increase in productivity?
a. either an increase in human capital or an increase in physical capital b. an increase in human capital but not an increase in physical capital c. an increase in physical capital but not an increase in human capital d. neither an increase in human capital nor an increase in physical capital
ANS: A DIF: 2 REF: 25-2 NAT: Analytic LOC: Productivity and growth
TOP: Productivity | Human capital | Physical capital MSC:
Interpretive
101. Which of the following is correct?
a. Once adjustment is made for inflation, the prices of most natural resources have been about steady
or falling.
b. Technological progress has allowed us to substitute renewable resources for some nonrenewable
resources.
c. Technological progress has made once-crucial natural resources less necessary. d. All of the above are correct.
ANS: D
NAT: Analytic MSC: Interpretive
DIF: 1 REF: 25-2 LOC: Productivity and growth TOP:
Natural resources
102. Given that a country’s real output has increased, in which of the following cases can we be sure that its
productivity also has increased?
a. The total number of hours worked rose.
b. The total number of hours worked stayed the same. c. The total number of hours worked fell. d. Both b and c are correct.
ANS: D
NAT: Analytic MSC: Interpretive
DIF: 2 REF: 25-2 LOC: Productivity and Growth
TOP: Output | Productivity
103. Using the notation and production function in the text, Y/L is
a. productivity. b. output.
c. the availability of natural resources. d. the amount of human capital.
ANS: A
NAT: Analytic TOP: Productivity DIF: 1 REF: 25-2
LOC: The Study of economics, and definitions of economics MSC: Interpretive
Chapter 25 /Production and Growth ? 1717
104. Using the production function and notation in the text, H/L measures
a. natural resources per worker. b. human capital per worker. c. output per worker.
d. physical capital per worker.
ANS: B DIF: 2 REF: 25-2 NAT: Analytic LOC: The Study of economics, and definitions of economics TOP: Production function MSC: Interpretive
105. In a particular production process, if the quantities of all inputs used are increased by 60 percent, then the
quantity of output increases by 60 percent as well. This means that a. the production process cannot be enhanced by technological advances.
b. no mathematical representation of the relevant production function can be formulated. c. the relevant production function has the limits-to-growth property.
d. the relevant production function has the constant-returns-to-scale property.
ANS: D DIF: 2 REF: 25-2 NAT: Analytic LOC: Productivity and growth
TOP: Production function | Constant returns to scale MSC:
Interpretive
106. If your firm’s production function has constant returns to scale, and if you doubled all your inputs, then your
firm's output would a. not change.
b. increase, but by less than double. c. double.
d. more than double.
ANS: C DIF: 1 REF: 25-2 NAT: Analytic LOC: The Study of economics, and definitions of economics TOP: Constant returns to scale MSC: Definitional
107. You bake cookies. One day you double the time you spend, double the number of chocolate chips, flour, eggs,
and all your other inputs, and bake twice as many cookies. Your cookie production function has a. decreasing returns to scale. b. zero returns to scale. c. constant returns to scale. d. increasing returns to scale.
ANS: C DIF: 1 REF: 25-2 NAT: Analytic LOC: The Study of economics, and definitions of economics TOP: Production function | Constant returns to scale MSC: Interpretive
108. If there are constant returns to scale, the production function can be written as
a. xY = 2xAF(L, K, H, N). b. Y/L = A F(xL, xK, xH, xN). c. Y/L = A F( 1, K/L, H/L, N/L). d. L = AF(Y, K, H, N).
ANS: C DIF: 2 REF: 25-2 NAT: Analytic LOC: The Study of economics, and definitions of economics TOP: Constant returns to scale MSC: Interpretive
109. If a production function has constant returns to scale, output can be doubled if
a. labor alone doubles.
b. all inputs but labor double. c. all of the inputs double. d. None of the above is correct.
ANS: C DIF: 1 REF: 25-2 NAT: Analytic LOC: The Study of economics, and definitions of economics TOP: Constant returns to scale MSC: Interpretive