1058 ? Chapter 25/Production and Growth
82. Historically, the market prices of most natural resources (adjusted for inflation) have
a. increased.
b. remained stable.
c. remained stable or decreased. d. decreased. ANS: C PTS: 1 DIF: 2 REF: 25-2 TOP: Natural resources MSC: Definitional 83. The behavior of market prices over time show that natural resources
a. are a limit to economic growth. b. are unrelated to economic growth. c. are not a limit to economic growth.
d. are the major determinant of productivity. ANS: C PTS: 1 DIF: 1 REF: 25-2 TOP: Natural resources MSC: Definitional
84. Which of the following is true?
a. There are no renewable natural resources.
b. The prices of most natural resources are stable or falling relative to other prices. c. Technology requires greater use of natural resources. d. Human capital is equivalent to technology. ANS: B PTS: 1 DIF: 2 REF: 25-2 TOP: Natural resources | Technology MSC: Interpretive 85. If natural resources had become scarcer, then we’d expect their
a. prices to have risen more than inflation as they have.
b. prices to have risen more than inflation, but they have not. c. known quantities to have fallen as they have. d. known quantities to have fallen but they have not. ANS: B PTS: 1 DIF: 1 REF: 25-2 TOP: Natural resources MSC: Analytical
86. If an inexpensive alternative to oil were found, the price of oil adjusted for inflation
a. would decline as the alternative would reduce the demand for oil. b. would decline as the alternative would reduce the supply of oil. c. would increase as the alternative would increase the demand for oil. d. would increase as the alternative would increase the supply of oil. ANS: A PTS: 1 DIF: 3 REF: 25-2 TOP: Natural resources MSC: Interpretive
87. Over time people have become more conscientious about recycling paper. At the same time corporations have found
new ways to use this scrap paper. From these two things a. we can be sure that scrap paper is now less scarce. b. we can be sure that scrap paper is now more scarce.
c. we know that the scarcity of scrap paper has not changed. d. we cannot tell if the scarcity of scrap paper has changed. ANS: D PTS: 1 DIF: 3 REF: 25-3 TOP: Natural resources MSC: Analytical 88. A leading environmental group recently published a report contending that humans are running a \
because we are using natural resources faster than they can be regenerated. The group claims that this means that economic growth will eventually stop, and will even be reversed. An economist would a. agree with the report, and would point to rising natural resource prices as evidence.
b. agree with the report, but wouldn't think it was important because growth will not slow down for several
centuries.
c. disagree with the report, in part because it ignores the mitigating effects of technological change.
d. disagree with the report because labor and capital are the primary determinants of growth, and since they are
plentiful, growth will not slow down.
ANS: C PTS: 1 DIF: 2 REF: 25-2 TOP: Natural resources MSC: Interpretive
Chapter 25/Production and Growth ? 1059
89. If a good has become more scarce than we know for sure that
a. demand for it must have increased. b. the supply of it must have decreased.
c. either demand for it must have increased or the supply of it must have decreased. d. both the supply of it and the demand for it decreased. ANS: C PTS: 1 DIF: 3 REF: 25-2 TOP: Natural resources MSC: Interpretive
90. Which of the following best states economists' understanding of the facts concerning the relationship between natural
resources and economic growth?
a. A country with no or few domestic natural resources is destined to be poor.
b. Differences in natural resources have virtually no role in explaining differences in standards of living.
c. Some countries can be rich mostly because of their natural resources and countries without natural resources need
not be poor, but can never have very high standards of living.
d. Abundant domestic natural resources may help make a country rich, but even countries with few natural
resources can have high standards of living.
ANS: D PTS: 1 DIF: 2 REF: 25-2 TOP: Natural resources MSC: Interpretive 91. In the country of Krypton, the price of lead increased from $20 per pound to $21 per pound during a time when the
overall price level increased by 5 percent. During this period, the real price of lead a. increased. b. decreased.
c. stayed the same.
d. might have increased, decreased or stayed the same; more information is needed to be sure. ANS: C PTS: 1 DIF: 2 REF: 25-2 TOP: Natural resources MSC: Applicative 92. Suppose over the last year that the price of scrap paper rose from $100 a ton to $108 a ton. Over the same time
suppose an overall measure of prices rose from 125 to 130. The
a. price of scrap paper rose by less than inflation, but this doesn’t necessarily mean it became scarcer. b. price of scrap paper rose by less than inflation, and this means it became scarcer. c. price of scrap paper rose by more than inflation, and this means it became scarcer.
d. price of scrap paper rose by more than inflation, but this doesn’t necessarily mean that it become scarcer. ANS: C PTS: 1 DIF: 2 REF: 25-2 TOP: Natural resources MSC: Applicative 93. After adjusting for inflation, over time the prices of most natural resources have been
a. steady or falling, meaning that our ability to conserve them is growing more rapidly than their supplies are
dwindling.
b. steady or falling, meaning that their supplies are dwindling more rapidly than our ability to conserve them is
growing.
c. rising, meaning that our ability to conserve them is growing more rapidly than their supplies are dwindling. d. rising, meaning that their supplies are dwindling more rapidly than our ability to conserve them is growing. ANS: A PTS: 1 DIF: 1 REF: 25-2 TOP: Natural resources MSC: Interpretive 94. Proprietary technology is knowledge that is
a. known but no longer used much. b. known, but only recently discovered.
c. known mostly by only those in a certain profession. d. known only by the company that discovered it. ANS: D PTS: 1 DIF: 1 REF: 25-2 TOP: Proprietary technological knowledge
MSC: Definitional
1060 ? Chapter 25/Production and Growth
95. Proprietary technology is technology that is
a. widely used because it is easy to learn.
b. widely used because the government subsidizes its use.
c. not widely used because people could, but have not, taken the time to learn how to apply it. d. not widely used because it is known or controlled only by the company that discovered it. ANS: D PTS: 1 DIF: 1 REF: 25-2 TOP: Proprietary technological knowledge MSC: Definitional
96. A management professor discovers a way for corporate management to operate more efficiently. He publishes his
findings in a journal. His findings are a. proprietary and common knowledge.
b. neither proprietary nor common knowledge. c. proprietary, but not common, knowledge. d. common, but not proprietary, knowledge. ANS: D PTS: 1 DIF: 1 REF: 25-2 TOP: Technological knowledge MSC: Definitional
97. Your company discovers a better way to produce mousetraps, but your better methods are not apparent from the
mousetraps themselves. Your knowledge of how to more efficiently produce mousetraps is a. common technological knowledge.
b. common, but not technological, knowledge. c. proprietary technological knowledge.
d. proprietary, but not technological, knowledge. ANS: C PTS: 1 DIF: 1 REF: 25-2 TOP: Technological knowledge MSC: Interpretive
98. Technological knowledge refers to
a. human capital.
b. available information on how to produce things.
c. resources expended transmitting society's understanding to the labor force. d. All of the above are technological knowledge. ANS: B PTS: 1 DIF: 1 REF: 25-2 TOP: Technological knowledge MSC: Interpretive
99. Thomas Edison received patents on many of his inventions. While the patents existed, his ideas were
a. public goods and proprietary knowledge. b. public goods but not proprietary knowledge. c. private goods and proprietary knowledge. d. private goods but not proprietary knowledge. ANS: C PTS: 1 DIF: 2 REF: 25-2 | 25-3 TOP: Technological knowledge MSC: Interpretive
100. The relationship between the quantity of output created and the quantity of inputs needed to create it is called
a. the capital accumulation function. b. technological knowledge. c. the production function. d. human capital. ANS: C PTS: 1 DIF: 1 REF: 25-2 TOP: Production function MSC: Definitional 101. An understanding of the best ways to produce goods and services is called
a. human capital. b. physical capital. c. technology. d. productivity. ANS: C PTS: 1 DIF: 1 REF: 25-2 TOP: TechnologyMSC: Definitional
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102. If your firm has constant returns to scale, then if you doubled all your inputs your firm's output would
a. not change.
b. increase, but by less than double. c. double.
d. more than double. ANS: C PTS: 1 DIF: 1 REF: 25-2 TOP: Constant returns to scale MSC: Definitional
103. You bake cookies. One day you double the time you spend, double the number of chocolate chips, flour, eggs, and all
your other inputs, and bake twice as many cookies. Your cookie production function has a. decreasing returns to scale. b. zero returns to scale. c. constant returns to scale. d. increasing returns to scale. ANS: C PTS: 1 DIF: 1 REF: 25-2 TOP: Production function MSC: Interpretive 104. If there are constant returns to scale, the production function can be written as
a. xY = 2xAF(L, K, H, N). b. Y/L = A F(xL, xK, xH, xN). c. Y/L = A F( 1, K/L, H/L, N/L). d. L = AF(Y, K, H, N). ANS: C PTS: 1 DIF: 2 REF: 25-2 TOP: Constant returns to scale MSC: Definitional 105. If a production function has constant returns to scale, output can be doubled if
a. labor alone doubles.
b. all inputs but labor double. c. all of the inputs double.
d. None of the above is correct. ANS: C PTS: 1 DIF: 1 REF: 25-2 TOP: Constant returns to scale MSC: Interpretive
106. Suppose there are constant returns to scale. Now suppose that over time a country doubles its workers, its natural
resources, and its human capital, but its technology is unchanged. Which of the following would double? a. both output and productivity b. output, but not productivity c. productivity, but not output d. neither productivity nor output ANS: B PTS: 1 DIF: 3 REF: 25-2
TOP: Production function | Constant returns to scale MSC: Analytical
107. If the production function for an economy had constant returns to scale, the labor force doubled, and all other inputs
stayed the same, then real GDP would a. stay the same.
b. increase by 50 percent.
c. increase, but by something less than double. d. double. ANS: C PTS: 1 DIF: 2 REF: 25-2 TOP: Production function MSC: Applicative 108. If the number of workers in an economy doubled, all other inputs stayed the same, and there were constant returns to
scale, productivity would
a. fall to less than half its former value. b. fall but by less than half. c. stay the same.
d. rise but less than double. ANS: B PTS: 1 DIF: 3 REF: 25-2 TOP: Production function | Productivity MSC: Analytical