11.Thetraditionalviewoftheproductionprocessisthatcapitalissubjectto
a.constantreturns.
b.increasingreturns.
c.diminishingreturns.
d.diminishingreturnsforlowlevelsofcapital,andincreasingreturnsforhighlevelsofcapital.
12.Iftherearediminishingreturnstocapital,then
a.capitalproducesfewergoodsasitages.
b.oldideasarenotasusefulasnewones.
c.increasesinthecapitalstockeventuallydecreaseoutput.
d.increasesinthecapitalstockincreaseoutputbyeversmalleramounts.
13.Allelseequal,iftherearediminishingreturns,thenwhichofthefollowingistrueifacountryincreasesitscapitalbyoneunit?
a.Outputwillrisebymorethanitdidwhenthepreviousunitwasadded.
b.Outputwillrisebutbylessthanitdidwhenthepreviousunitwasadded.
c.Outputwillfallbymorethanitdidwhenthepreviousunitwasadded.
d.Outputwillfallbutbylessthenitdidwhenthepreviousunitwasadded.
14.Allelseequal,iftherearediminishingreturns,thenifacountryraiseditscapitalby100unitslastyearandby100unitsthisyear,
a.theincreaseinoutputwasgreaterforthisyearthanlastyear.
b.theincreaseinoutputwasgreaterlastyearthanthisyear.
c.theincreaseinoutputisthesameinbothyears.
d.Noneoftheaboveisnecessarilycorrect.
15.CountryAandcountryBarethesameexceptcountryAcurrentlyhasmorecapital.Assumingdiminishingreturns,ifbothcountriesincreasetheircapitalby100unitsandotherfactorsthatdetermineoutputareunchanged,then
a.outputincountryAincreasesbymorethanincountryB.
b.outputincountryAincreasesbythesameamountasincountryB.
c.outputincountryAincreasesbylessthanincountryB.
d.Noneoftheaboveisnecessarilycorrect.
16.CountryAandcountryBbothincreasetheircapitalstockbyoneunit.OutputincountryAincreasesby12whileoutputincountryBincreasesby15.Otherthingsthesame,diminishingreturnsimpliesthatcountryAis
a.richerthanCountryB.IfCountryAaddsanotherunitofcapital,outputwillincreasebymorethan12units.
b.richerthanCountryB.IfCountryAaddsanotherunitofcapital,outputwillincreasebylessthan12units.
c.poorerthanCountryB.IfCountryAaddsanotherunitofcapital,outputwillincreasebymorethan12units.
d.poorerthanCountryB.IfCountryAaddsanotherunitofcapital,outputwillincreasebylessthan12units.
17.CountryAandcountryBbothincreasetheircapitalstockbyoneunit.OutputincountryAincreasesby10whileoutputincountryBincreasesby8.Otherthingsthesame,diminishingreturnsimpliesthatcountryAis
a.richerthanCountryB.IfCountryAaddsanotherunitofcapital,outputwillincreasebymorethan10units.
b.richerthanCountryB.IfCountryAaddsanotherunitofcapital,outputwillincreasebylessthan10units.
c.poorerthanCountryB.IfCountryAaddsanotherunitofcapital,outputwillincreasebymorethan10units.
d.poorerthanCountryB.IfCountryAaddsanotherunitofcapital,outputwillincreasebylessthan10units.
18.Onaproductionfunction,ascapitalperworkerincreases,outputperworker
a.increases.Thisincreaseislargeratlargervaluesofcapitalperworker.
b.increases.Thisincreaseissmalleratlargervaluesofcapitalperworker.
c.decreases.Thisdecreaseislargeratlargervalueofcapitalperworker.
d.decreases.Thisdecreaseissmalleratlargervalueofcapitalperworker.
19.Accordingtothetraditionalviewoftheproductionfunction,whichofthefollowingvaluesoftheadditionstooutputperworkerwouldbeconsistentwithmovingfrom5to6,andthenfrom6to7,andthenfrom7to8unitsofcapitalperworkerinthatorder?
a.40,40, 40
b.40, 35,38
c.40,34, 32
d.40, 43,48
20.Allelseequal,iftherearediminishingreturns,thenwhathappenstoproductivityifbothcapitalandlaborincrease?
a.Productivitywilldefinitelyfall.
b.Productivitywilldefinitelybeunchanged.
c.Productivitywilldefinitelyrise.
d.Noneoftheabovearenecessarilycorrect.
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