Use the Cobb-Douglas production function to explain why even massive movements of labor and capital across national borders may have little impact on differences in per capita income
What will be an ideal response?
Relatively low per capita income may be due to low total factor productivity or to low capital per worker. In the latter case, migration of capital or of labor could reduce inequality. In the former case, however, rising levels of capital in a low-income economy will do little to raise output per person. Declines in the labor input due to out-migration from a low-income economy might mean more capital for each of the remaining workers but, again, the increase in output per worker will be small if total factor productivity is low.
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Assume the United States is the "domestic" country and China is the "foreign" country. Which of the following might increase the real exchange rate between the United States and China?
A) an increase in the price level in the United States B) an appreciation of the yuan C) an increase in the price level of China D) a depreciation of the dollar
Other things remaining the same, if a large part of the population decided against having soda for health reasons, there would be a(n):
a. increase in the quantity of soda supplied. b. increase in the quantity supplied of complements like fries and burgers. c. decrease in the price of soda. d. rightward shift of the demand curve for soda. e. decrease in the quantity demanded of substitutes like mineral water.
If the opportunity costs of producing a good increase as more of that good is produced, the economy's production possibility frontier will be
A. a negatively sloped straight line. B. negatively sloped and "bowed inward" toward the origin. C. negatively sloped and "bowed outward" from the origin. D. a positively sloped straight line.
Assuming labor is the only variable factor of production, production of a good will occur
A. as long as the marginal revenue product of labor is positive. B. if the marginal cost of a unit of output equals the marginal revenue product of labor. C. if society values a good more than it costs firms to hire the workers to produce the good. D. as long as the product's price is greater than the marginal revenue product of labor.