Principles of Economics (12th Edition)
12th Edition
ISBN: 9780134078779
Author: Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher: PEARSON
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Chapter 22, Problem 3.3P
To determine
Possibilities in the short or long run growth.
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0.5 0.5
Given a production function: Y = AK N If output grows at 5%, capital grows at 2% and the number of
workers grows at 4%, then technology (or total factor productivity) grows at % ? (Answer in integer only,
no decimal place.) Your Answer: Answer
Given a production function: Y = AK0.5 N0.5. If output grows at 5%,
capital grows at 2% and the number of workers grows at 4%, then technology (or
total factor productivity) grows at %?
(Answer in integer only, no decimal place.)
Your Answer:
Answer
Please assist on answering the questions below
Alice runs a shoemaking factory that utilizes both labor and capital to make shoes. Which of the following would shift the factory’s demand for capital? You can select one or more answers from the choices shown a. Many consumers decide to walk barefoot all the time. b. New shoemaking machines are twice as efficient as older machines. c. The wages that the factory has to pay its workers rise due to an economy-wide labor shortage.
Chapter 22 Solutions
Principles of Economics (12th Edition)
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- Which of the following statements are true? A basic assumption of the theory of production is that: A firm cannot borrow money to finance its input expenditures. A firm can buy as much labor and capital as it desires in the long-run A firm can reduce the number of workers it uses, but it cannot adjust how much capital it uses in the short-run When the marginal product of labour starts falling, the firm must cease production a. II only b. II and III c. I, III and IV d. II, III and IVarrow_forwardThe following graph shows a variety of possible production functions (PFs) in an imaginary economy, assuming constant levels of human capital and capital stock. Because human capital and capital stock remain unchanged, each of these production functions represents a different level of the technology. The slope of the line connecting the origin to point A is _______ (options: steeper, flatter) than the slope of the line connecting the origin to point B, because the slope of such a line is equivalent to __________ (options: the marginal physcial product of labor, marginal cost, productivity).arrow_forwardWhat is the economic meaning of the powers of K and L? Briefly explain. What is the level of output ? produced when the economy in long-run equilibrium.arrow_forward
- Which of the following statements about capital are correct? a) In economic jargon capital is the net worth of a business enterprise. b) Capital is defined as anything that is produced that then produces other things c) An increase in capital will grow the economy because capital is a resource in the production process and an increase in resources increases the production possibilities or potential production of the economy. d) Capital represents the tools that labor uses and thus an increase in capital tends to increase the productivity of labor (and possibly other resources) and that magnifies economic growth. e) Most technological advances involve improvements to the tools of production, which is capital, so embodiment of new technology in capital is yet another way capital fosters economic growth. f) increasing capital in the economy has to lead to greater income inequality, since most capital is owned by the rich.…arrow_forwardQuestion 19 Consider the following graph of a production function when capital is constant. (The following is a description of the figure: it shows a two-axis graph; the horizontal axis measures labor and the vertical axis measures output; for a K fixed, the graph shows that maximal production that the firm can achieve with different levels of labor; the graph starts at cero production for zero labor; then it is increasing in all of its range; three levels of labor are shown as reference; there are L1, L2, and L3; they are related as follows L1<L2<L3; the graph is convex from 0 to L1, that is, its slope is increasing; the graph is concave from L1 on, that is, its slope is decreasing; the line that is tangent to the curve at L2, passes through the origin of the graph.) From the graph we know that for the corresponding K: MPL(L2,K)=MPL(L3,K) MPL(L1,K)>MPL(L2,K) MPL(L1,K)=MPL(L2,K) MPL(L1,K)<MPL(L2,K) MPL(L3,K)>MPL(L2,K)arrow_forward[The following scenario applies to the next two questions.] An economy has a Cobb-Douglas production function: Y = AK L(1-a). A is the technology level, K is capital; L is labor; and Y is income. ● In 20X1, the technology level A is 139, capital K = 245, labor L = 458, income Y = 8,155 In 20X2, the technology level A is 144.96, capital K = 259.26, labor L = 474.12, income Y = 8,945.71 In 20X3, the technology level A is 152.02, capital K = 273.31, labor L = 489.20 Question 1.6: Elasticity of income with respect to labor What is the elasticity of income with respect to labor? A. 18% B. 20% C. 22% D. 24% E. 26% Question 1.7: Income What is income in 20X3? A. 9,240.34 B. 9,535.25 C. 9,830.15 D. 10,125.06 E. 10,419.96arrow_forward
- 6. Consider a hypothetical economy that has the production function Y = = F (K, LE) = K¹/3 (LE) 2/3, where Y is output, K is capital, and LE is the number of effective workers. Suppose the saving rate is 20%, the capital depreciates by 3%, the population grows at the rate of 1%, and the rate of labor-augmenting technological change is 1%. a. Solve for the per-effective-worker production function.arrow_forwardThe following graph shows the production possibilities curve for an economy that produces Consumption goods and Capital goods. Use the graph to answer the following questions A) How do you describe what is happening as the economy moves from point P to point L? (discuss it in terms of economic efficiency) B) Which combination - K or M - can lead to faster economic growth in the future? How do you know? Explain your answer. C) If the economy is currently operation at point L, what is the opportunity cost of producing 10 more Capital goods (Moving from combination L to combination M)?arrow_forwardIn Production Theory, what is meant by a “short-run” production period? What is meant by a “long-run” production period?arrow_forward
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