41) The idea of “diminishing returns” means that real GDP ________ as the quantity of labor increases.
A) increases at a slower rate
B) decreases at a slower rate
C) increases at a faster rate
D) decreases at a faster rate
E) does not change
42) According to the production function, as the quantity of labor employed increases, real GDP increases
A) at an increasing rate.
B) at a decreasing rate.
C) at a constant rate.
D) and then eventually decreases.
E) until it reaches potential GDP and then it no longer changes.
43) As additional units of labor hours are employed, holding all other factors constant, along the production function,
A) real GDP increases at an increasing rate.
B) nominal GDP decreases at an increasing rate.
C) real GDP increases at a decreasing rate.
D) real GDP increase at a constant rate.
E) real GDP initially decreases and then starts to increase.
44) The idea that the production function exhibits _______implies that ________.
A) diminishing returns; the Lucas Wedge increases at output increases.
B) diminishing returns; each additional unit of labor employed generates an ever-decreasing amount of real GDP.
C) increasing returns; potential GDP is always increasing.
D) increasing returns; output should increase steadily as technology grows.
E) constant returns; each additional unit of labor employed generates an increasing amount of real GDP.
45) As the quantity of labor employed increases, the production functions exhibits a
A) positive, linear relationship.
B) positive relationship, with each additional unit of labor producing less additional real GDP.
C) positive relationship, with each additional unit of labor producing more additional real GDP.
D) negative, linear relationship.
E) U-shaped curve.
46) Diminishing returns along a production function means that each additional hour of labor employed
A) produces a successively smaller additional amount of real GDP.
B) produces a successively larger additional amount of real GDP.
C) produces a constant additional amount of real GDP.
D) does not produce any additional real GDP.
E) forces the real wage rate to rise.
47) The production function shows that as employment increases, real GDP
A) increases at an increasing rate.
B) increases at a decreasing rate.
C) increases at a constant rate.
D) decreases at a decreasing rate.
E) increases until it reaches potential GDP and then it starts to decrease.
48) Diminishing returns, so that each additional hour of labor employed produces successively smaller additional amounts of real GDP, exist because
A) labor is not very productive.
B) extra labor produces more output.
C) all other factors are held fixed.
D) the price level rises as more workers are employed.
E) additional workers are paid higher wage rates.
49) As more labor is hired, moving along the production function, diminishing returns occur because
A) workers are overworked and so their productivity decreases.
B) the wage rate paid is too low and so workers decrease their work effort.
C) there are fixed quantities of other resources.
D) the real wage rate must increase in order to hire additional workers.
E) real GDP increases more rapidly the more workers are hired.
50) A reason a nation faces diminishing returns along a production function is because
A) unemployment always exists.
B) potential GDP is fixed.
C) the quantity of physical capital is fixed.
D) full employment is not possible.
E) the wage rate is fixed while moving along the production function.
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