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Exam 4: A Model of Production

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Question 51

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Refer to the following figure when answering Figure 4.1: Production Function -Consider Figure 4.1. The shape of this production function suggests that $\alpha$ in the production function $Y = K ^ { \alpha } L ^ { 1 - \alpha }$ is:

A) equal to one
B) greater than one
C) equal to zero
D) less than one
E) Not enough information is given.

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Question 52

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In the Cobb-Douglas production function $Y = \bar { A } K ^ { 1 / 4 } L ^ { 3 / 4 }$ , defining y = Y/L as output per person and k = K/L as capital per person, the per person production function is:

A) $y = \bar { A } k ^ { 3 / 4 }$

B) $y = \bar { A } k ^ { - 1 / 4 }$

C) $y = \bar { A } k ^ { 1 / 4 }$

D) $y = \bar { A } k ^ { 3 / 4 }$ .

E) None of these answers are correct.

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Question 53

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If the marginal product of labor equals the wages, firms should hire more workers.

Suppose the total factor productivity in Switzerland, Italy, South Africa, and India are 0.89, 0.70, 0.33, and 0.21, respectively. If the U.S. total factor productivity is 1.00, then the United States is ________ productive, respectively, than these four countries.

As an economist working at the International Monetary Fund, you are given the following data for Japan: observed per capita GDP, relative to the United States, is 0.760; predicted per capita GDP, given by $y = k ^ { 1 / 3 }$ , is 1.06. What is total factor productivity?

The marginal product of the labor curve represents:

You are an economist working for the International Monetary Fund. Your boss wants to know what the total factor productivity of India is, but all you have is data on per capita GDP, y, and the per capita capital stock, k. If you assume that capital's share of GDP is one-fourth, what would you use to find total factor productivity?

In the equation $Y = F ( K , L ) = \bar { A } \bar { K } ^ { 1 / 3 } L ^ { 2 / 3 }$ , the "bars" over the A and K mean that these variables are:

As an economist working at the International Monetary Fund, you are given the following data for Burundi: predicted per capita GDP, relative to the United States, as given by $y = k ^ { 1 / 3 }$ , is 0.10, and total factor productivity is 0.083. What is the observed per capita GDP, relative to the United States?

Models simplify ________ of decisions into just a few equations.

The production function $Y = \bar { A } \bar { K } ^ { 1 / 3 } L ^ { 2 / 3 }$ describes:

A production function exhibits decreasing returns to scale if:

Which of the following is/are essential for economic success?

The two main inputs we consider in a simple production function are:

Refer to the following figure when answering Figure 4.2: The Production Function -Consider Figure 4.2. The shape of this production function suggests:

Consider two countries, A and B. If each country produces using identical production functions, but y_A = y_B and k_A = k_B, the total factor productivity of country A equals that of B.

Refer to the following table when answering Table 4.1: Production Model's Prediction for Per Capita GDP (US = 1) $\begin{array}{lll}&\text {Fredicted output }&\text {Observed }\\&\text {per capita, }y = \bar { k } ^ { 1 / 3 }&\text {per capita GDP } \\\hline \text { Switzerl and } & 0.966 & 1.083 \\\text { United Kingdom } & 0.828 & 0.876 \\\text { Japan } & 0.760 & 1.056 \\\text { Italy } & 0.686 & 0.975 \\\text { Spain } & 0.661 & 0.944 \\\text { Brazil } & 0.201 & 0.559 \\\text { South Africa } & 0.182 & 0.546 \\\text { China } & 0.172 & 0.528 \\\text { India } & 0.084 & 0.394 \\\text { Burundi } & 0.010 & 0.180 \\\hline\end{array}$ -One explanation for the difference between the predicted output per person and the observed per capita GDP in Table 4.1 is differences in:

Accounting profit is ________ and is equal to ________.

What are the shortcomings of using the production model $y = k ^ { 1 / 3 }$ ? What might we include in our model to improve the fit of this simple model?

As an economist working at the International Monetary Fund, you are given the following data for South Africa: predicted per capita GDP, relative to the United States, as given by $y = k ^ { 1 / 3 }$ , is 0.55, and total factor productivity is 0.33. What is the observed per capita GDP, relative to the United States?