Chapter 25
Production and Growth
Sec00 - Production and Growth
MULTIPLE CHOICE
3. During the past century if the average growth rate of real GDP per person of Vietnam had been 7%, it implies that
it would have doubled, on average, about every
a. 100 years.
b. 70 years.
c. 10 years.
d. 25 years.

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10.

Which of the following statements is correct?
a. The level of real GDP is a good gauge of economic prosperity, and the growth of real GDP is a
good gauge of economic progress.
b. The level of real GDP is a good gauge of economic progress, and the growth of real GDP is a good
gauge of economic prosperity.
c. The level of real GDP is a good gauge of economic prosperity, and the level of real GDP per person
is a good gauge of economic progress.
d. The level of real GDP is a good gauge of economic progress, and the level of real GDP per person
is a good gauge of economic prosperity.

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6.

Over the past 100 years, U.S. real GDP per person has doubled about every 35 years. If, in the next 100 years,
it doubles every 25 years, then a century from now U.S. real GDP per person will be
a. 4 times higher than it is now.
b. 8 times higher than it is now.
c. 12 times higher than it is now.
d. 16 times higher than it is now.

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Sec01 - Production and Growth - Economic Growth around the World
MULTIPLE CHOICE
5.

A nation's standard of living is best measured by its
a. real GDP.
b. real GDP per person.
c. nominal GDP.
d. nominal GDP per person.

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6.

If one wants to know how the material well-being of the average person has changed over time in a given
country, one should look at the
a. level of real GDP.
b. growth rate of nominal GDP.
c. growth rate of real GDP.

d. growth rate of real GDP per person.

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7.

The level of real GDP person
a. differs widely across countries, but the growth rate of real GDP per person is similar across
countries.
b. is very similar across countries, but the growth rate of real GDP per person differs widely across
countries.
c. and the growth rate of real GDP per person are similar across countries.
d. and the growth rate of real GDP per person vary widely across countries.

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22.

Which of the following does the level of real GDP measure?
a. total real income
b. productivity
c. the standard of living
d. All of the above are correct.

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23.


31.

37.

Which of the following is correct?
a. Countries with the highest growth rates over the last 100 years are the ones that had the highest
level of real GDP 100 years ago.
b. Most countries have had little fluctuation around their average growth rates during the past 100
years.
c. The ranking of countries by income changes substantially over time.
d. Over the last 100 years, Japan had the highest real GDP growth rate, and now has the highest real
GDP per person.
Last year real GDP in the imaginary nation of Oceania was 561.0 billion and the population was 2.2 million.
The year before, real GDP was 500.0 billion and the population was 2.0 million. What was the growth rate of
real GDP per person during the year?
a. 12 percent
b. 10 percent
c. 4 percent
d. 2 percent
Which of the following is not correct?
a. Across countries there are large differences in the average income per person. These differences
are reflected in large differences in the quality of life.
b. With a growth rate of about 2 percent per year, average income per person doubles about every 35
years.
c. The ranking of countries by average income changes very little over time.
d. In some countries real income per person has changed very little over many years.

Sec02 - Production and Growth - Productivity: Its Role and Determinants
MULTIPLE CHOICE

1.

4.

6.

7.

9.

The one variable that stands out as the most significant explanation of large variations in living standards
around the world is
a. productivity.
b. population.
c. preferences.
d. prices.
Productivity is defined as
a. the amount of difficulty that is involved in producing a given quantity of goods and services.
b. the quantity of labor that is required to produce one unit of goods and services.
c. the quantity of goods and services produced from each unit of labor input.
d. the quantity of goods and services produced over a given amount of time.
Perry accumulated a lot of mathematical skills while in high school, college, and graduate school. Economists
include these skills as part of Perry’s
a. standard of learning.
b. technological knowledge.
c. physical capital.
d. human capital.
What term do economists use to describe the relationship between the quantity of inputs used and the quantity
of output produced?
a. production function

b. input function
c. capital function
d. returns to scale
Technological knowledge
a. is the same thing as human capital.
b. can be discovered but it can never be kept secret.
c. is a determinant of productivity.
d. does not play a role in the relationship that economists call the production function.

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11.

Industrial machinery is an example of
a. a factor of production that in the past was an output from the production process.
b. physical capital.
c. something that influences productivity.
d. All of the above are correct.

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13.

Despite its status as one of the richest countries in the world, Japan
a. has a very low level of productivity.
b. has few natural resources.
c. has very little human capital.
d. engages in a relatively small amount of international trade.


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15.

Which of the following statements is correct?
a. By definition, all natural resources are nonrenewable.
b. Market prices give us reason to believe that natural resources are a limit to economic growth.
c. An economy must be blessed with ample quantities of natural resources if it is to be a highly
productive economy.
d. Differences in natural resources can explain some of the differences in standards of living around
the world.

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21.

In one day Alpha Cabinet Company made 40 cabinets with 320 hours of labor. What was their productivity?
a. 1/8 cabinet per hour
b. 8 hours per cabinet
c. 40 cabinets
d. None of the above is correct.

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27.


Workland has a population of 10,000, of whom 7,000 work 8 hours a day to produce a total of 224,000 final
goods. Laborland has a population of 5,000, of whom 4,000 work 12 hours a day to produce a total of 120,000
final goods.
a. Workland has higher productivity and higher real GDP per person than Laborland.
b. Workland has higher productivity but lower real GDP per person than Laborland.
c. Workland has lower productivity but higher real GDP per person than Laborland.
d. Workland has lower productivity and lower real GDP per person than Laborland.

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33.

Both Tom and Jerry work 10 hours a day. Tom can produce six baskets of goods per hour while Jerry can
produce four baskets of the same goods per hour. It follows that Tom's
a. productivity is greater than Jerry's.
b. output is greater than Jerry's.
c. standard of living is higher than Jerry's.
d. All of the above are correct.

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41.

The key determinant of a the standard of living in a country is
a. the amount of goods and services produced from each hour of a worker's time.
b. the total amount of goods and services produced within the country.
c. the total amount of its physical capital.
d. its growth rate of real GDP.


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47.

Which of the following would not be considered physical capital?
a. a new factory building
b. a computer used to help Mercury Delivery Service keep track of its orders
c. on-the-job training
d. a desk used in an accountant's office

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53.

Which of the following is human capital?
a. a student loan
b. understanding how to use a company's accounting software
c. training videos for new corporate employees
d. All of the above are correct.

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58.

Which of the following would be human capital and physical capital, respectively?
a. for an accounting firm, the accountants’ knowledge of tax laws and computer software

b. for a grocery store, grocery carts and shelving
c. for a school, chalkboard and desks
d. for a library, the building and the reference librarians’ knowledge of the Internet

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64.

Which of the following is an example of a renewable natural resource?
a. the knowledge possessed by scientists
b. carpenters’ labor services
c. lumber
d. All of the above are correct.
70. In a market economy, the real, or inflation-adjusted, price of a resource measures its
a. contribution to revenue.
b. relative scarcity.
c. productivity.
d. contribution to efficiency.
79. If a good has become more scarce, then we know for sure that
a. the demand for it increased.
b. the supply of it decreased.
c. either the demand for it increased or the supply of it decreased.
d. both the supply of it and the demand for it decreased.
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.

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.
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.
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.
111. An economy’s production function has the constant-returns-to-scale property. If the economy’s labor force
doubled and all other inputs stayed the same, then real GDP would
a. stay the same.
b. increase by exactly 50 percent.
c. increase by exactly 100 percent.
d. increase, but not necessarily by either 50 percent or 100 percent.
Scenario 25-1. An economy’s production form takes the form Y = AF(L, K, H, N).
118. Refer to Scenario 25-1. If the production function has the constant-returns-to-scale property, then it is
possible that the specific form of the production function is
a. Y = 4L + 2K + 3H + N
b. Y = (L + K + H + N)/4
c.
Y =2

d.
Y=4

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Sec03 - Production and Growth - Economic Growth and Public Policy
MULTIPLE CHOICE
1.

“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. represents the traditional view of the production process.
b. is an assertion that capital is subject to diminishing returns.
c. is made under the assumption that the quantities of human capital, natural resources, and
technology are being held constant.
d. All of the above are correct.

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