Figure 11-2
25) Refer to Figure 11-2. Based on the per-worker production function above, if the economy raises capital per hour worked from $35,000 to $40,000, by how much will real GDP per hour worked increase?
A) $150
B) $1,850
C) $2,000
D) $5,000
26) Refer to Figure 11-2. Assuming no technological change, if the United States increases capital per hour worked by $40,000 every year between 2010 and 2014, we would expect to see
A) real GDP per hour worked will increase by the same increment each year between 2010 and 2014.
B) real GDP per hour worked will be lower in 2014 than it was in 2010.
C) the per-worker production function will get flatter over time.
D) the per-worker production function will shift up every year there is increase in capital per hour worked.
27) According to new growth theory,
A) technological change is influenced by economic incentives.
B) centrally-planned economies are the most efficient.
C) growth in real GDP per capita occurs only if there are increasing returns.
D) economic growth is determined by forces outside the control of the market system.
28) Paul Romer, an economist at Stanford University, is most closely associated with what economic theory?
A) new growth theory
B) labor productivity theory
C) the process of creative destruction
D) the Communist Manifesto
29) According to new growth theory,
A) physical capital is nonexcludable.
B) knowledge capital is excludable.
C) knowledge capital is subject to increasing returns.
D) knowledge capital is rival and excludable.
30) Knowledge capital is
A) rival.
B) nonrival.
C) nonexcludable.
D) both B and C
31) Knowledge capital is nonrival in the sense that
A) two people can use the same knowledge to develop and produce a product.
B) firms do not compete to be the first to develop new technologies.
C) no single company can be excluded from the benefits of new technologies.
D) firms can benefit from the research and development of rival firms without paying for that benefit.
32) Firms free ride on the research and development of other firms when they
A) buy a firm’s newly developed product, and then give it away to consumers.
B) use knowledge other firms have developed without paying for that knowledge.
C) license a new technology from a firm that developed the new technology.
D) choose a level of research and development that is inefficiently high.
33) Which of the following government provisions would help increase the accumulation of knowledge capital?
A) patents
B) copyrights
C) education subsidies
D) All of the above are correct.
34) Because firms can free ride on the research and development of other firms,
A) firms choose a level of research and development where the marginal cost of research is equal to the economy’s marginal return of research.
B) firms choose a level of research and development where the marginal cost of research is above the economy’s marginal return of research.
C) firms choose a level of research and development where the marginal cost of research is below the economy’s marginal return of research.
D) firms choose a level of research and development where the marginal cost of research is below the individual firm’s marginal return of research.
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