Explain how advances in technology are critical to sustaining economic growth, even if capital per hour worked is consistently increasing. Provide a graph of a per-worker production function to support your answer
What will be an ideal response?
As the level of capital per hour worked increases, an economy moves along the per-worker production function toward higher levels of real GDP per hour worked. However, diminishing returns imply that successive increases in capital per hour work increase real GDP per hour worked at a decreasing rate. As shown in the graph below, moving from point A to point B implies an increase in capital per hour worked. As a result, real GDP per hour worked increases from $780 to $800 (an increase of $20 ). Moving from point B to point C implies a similar increase in capital per hour worked, but real GDP per hour worked increases from $800 to $810 (an increase of only $10 ). Without technological change that shifts the per-worker production function upward, continual growth in real GDP per hour worked cannot be sustained even if capital per hour worked continues to increase.
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The distribution of money income can be represented graphically using
A) supply and demand diagrams. B) a Lorenz curve. C) a Keynesian curve. D) a Distribution curve.
A company currently sells 10,000 units at $9/unit and makes $20,000 accounting profit. Variable costs currently stand at $6 per unit. What are the company's fixed costs?
a. $5,000 b. $10,000 c. $15,000 d. The company has no fixed costs
Which of the following correctly describes the time-inconsistency problem?
a. The problem that arises when policy makers have an incentive to announce one policy to influence expectations, but then pursue different policy once those expectations have been formed and acted on. b. The problem that arises when the president and Congress have an incentive to pursue policies that are different from those of the Fed. c. The problem that arises when consumer preferences change frequently over time such that a product considered highly desirable at one point would be considered undesirable after sometime. d. The problem that arises when firms increase supply of a product in anticipation of future increase in demand for the product, but suffers a heavy loss because of a steep fall in demand.
At the Pampered Pet Salon the marginal products of the first, second, and third workers are 20, 16, and 10 dogs washed, respectively. The total product (number of dogs washed) of the three worker is
A. 15.33. B. 30. C. 46. D. 138.