Consider a small island country whose only industry is fishing. The following table presents information about this small economy in two different years. Complete the table by calculating physical capital per worker and labor productivity. Hint: Recall that productivity is defined as the amount of goods and services a worker can produce per hour. In this problem, measure productivity as the quantity of goods per hour of labor. Year Physical Capital Labor Force Physical Capital per Worker Labor Hours Output Labor Productivity (Fishing poles) (Workers) (Fishing poles) (Hours) (Fish) 2027 120 60 1x 3,000 21,000 3x 2028 400 100 2x 3,500 49,000 4x Based on your calculations, (an increase/a decrease) in physical capital per worker from 2027 to 2028 is associated with (an increase/a decrease) in labor productivity from 2027 to 2028. Suppose you're in charge of establishing economic policy for this small island country. Which of the following policies would lead to greater productivity in the fishing industry? Check all that apply. Encouraging saving by allowing workers to set aside a portion of their earnings in tax-free retirement accounts Imposing a tax on fishing poles Imposing restrictions on foreign ownership of domestic capital Offering free public education to every worker in the country

Exploring Economics

8th Edition

ISBN:9781544336329

Author:Robert L. Sexton

Publisher:Robert L. Sexton

Chapter20: Economic Growth In The Global Economy

Section: Chapter Questions

Problem 4P

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Consider a small island country whose only industry is fishing. The following table presents information about this small economy in two different years.

Complete the table by calculating physical capital per worker and labor productivity.

Hint: Recall that productivity is defined as the amount of goods and services a worker can produce per hour. In this problem, measure productivity as the quantity of goods per hour of labor.

Year	Physical Capital	Labor Force	Physical Capital per Worker	Labor Hours	Output	Labor Productivity
	(Fishing poles)	(Workers)	(Fishing poles)	(Hours)	(Fish)
2027	120	60	1x	3,000	21,000	3x
2028	400	100	2x	3,500	49,000	4x

Based on your calculations, (an increase/a decrease) in physical capital per worker from 2027 to 2028 is associated with (an increase/a decrease) in labor productivity from 2027 to 2028.

Suppose you're in charge of establishing economic policy for this small island country.

Which of the following policies would lead to greater productivity in the fishing industry? Check all that apply.

Encouraging saving by allowing workers to set aside a portion of their earnings in tax-free retirement accounts
Imposing a tax on fishing poles
Imposing restrictions on foreign ownership of domestic capital
Offering free public education to every worker in the country

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