Question 1

Which of the following best describes the concept of diminishing returns in the context of the per worker production function?

Accepted Answer

As more capital is added per worker, each additional unit of capital results in smaller increases in output.

Question 2

Suppose a country increases its capital per worker while holding technology constant. According to the per worker production function, what is the likely outcome?

Accepted Answer

Real GDP per hour worked will increase, but by smaller and smaller amounts with each additional unit of capital.

Question 3

Which of the following statements about technological change is correct?

Accepted Answer

Technological change does not experience diminishing returns.

Question 4

According to New Growth Theory, what is the primary driver of long-run economic growth?

Accepted Answer

Technological change influenced by economic incentives.

Question 5

Why is knowledge capital considered a public good in the context of economic growth?

Accepted Answer

It is nonrival and nonexcludable, meaning one person's use does not reduce availability to others and it is difficult to prevent others from using it.

Question 6

Which of the following is an example of 'free riding' in the context of knowledge capital?

Accepted Answer

A company uses a new technology developed by another firm without paying for it.

Question 7

What is the main reason governments protect intellectual property through patents and copyrights?

Accepted Answer

To provide incentives for firms and individuals to innovate by allowing them to profit from their inventions.

Question 8

Suppose a government wants to encourage long-run economic growth. Which of the following policies would be most effective according to the study materials?

Accepted Answer

Subsidizing research and development and education.

Question 9

If a country experiences only increases in capital per worker but no technological change, what will eventually happen to its standard of living?

Accepted Answer

It will stop increasing due to diminishing returns to capital.

Question 10

Which of the following equations best represents the per worker production function, holding technology constant?

Accepted Answer

$$ y = f(k) $$

Question 11

A country is experiencing rapid economic growth due to technological innovation. According to the New Growth Theory, what is likely encouraging this innovation?

Accepted Answer

Strong economic incentives such as profits and intellectual property protection.

Question 12

Which of the following best explains why knowledge capital can lead to increasing returns at the economy level?

Accepted Answer

Because knowledge can be used by many firms simultaneously without being depleted.

Question 13

If a developing country is able to adopt existing technologies from advanced economies, what economic phenomenon is this an example of?

Accepted Answer

Catch-up effect.

Question 14

Suppose a firm invests in research and development, but other firms are able to use the resulting knowledge without paying for it. What is the likely market failure in this scenario?

Accepted Answer

Free riding on knowledge capital.

Question 15

Which of the following policies would NOT help increase a country's knowledge capital?

Accepted Answer

Reducing funding for public education.

Question 16

A country has reached a point where additional capital per worker yields very little increase in output per worker. What should the country focus on to sustain long-run economic growth?

Accepted Answer

Promoting technological change and innovation.

Question 17

Which of the following is a direct government policy to address the nonexcludable nature of knowledge capital?

Accepted Answer

Granting patents and copyrights.

Question 18

If the production function for output per worker is $$ y = f(k) $$, and $$ f(k) $$ exhibits diminishing returns, what happens to $$ \Delta y  as$$ $$ k $$ increases?

Accepted Answer

$$ \Delta y $$ decreases as $$ k $$ increases.

Question 19

Which of the following best illustrates the concept of 'catch-up' in economic growth?

Accepted Answer

A low-income country grows faster than a high-income country by adopting existing technologies.

Question 20

A government is considering two policies: (1) increasing subsidies for R&D, and (2) reducing protection for intellectual property. According to the study materials, what is the likely effect of these policies on technological change?

Accepted Answer

Policy (1) would encourage technological change, while policy (2) would discourage it.

Chapter 11: Long-Run Economic Growth – Key Concepts and Theories

Study Guide - Practice Questions

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