Macroeconomics (Fourth Edition)
4th Edition
ISBN: 9780393603767
Author: Charles I. Jones
Publisher: W. W. Norton & Company
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Chapter 6, Problem 4RQ
To determine
Explain the concept of non-rivalry based on the key production function of Romer.
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Consider now the two-period model in general equilibrium, so that prices, investment and labour supply are endogenous, i.e. the production economy. Analyse and carefully explain graphically and in words the general equilibrium effects of a decrease in TFP(total factor production) for a benchmark economy with no frictions.
Evaluate the statement “a model with total-factor augmenting technological progress is identical to a model with labor augmenting technological progress.”
The graph below represents per-worker production functions for the same country. Answer the following questions using this graph.
Which 1 concept explains that the area between B and C has a flatter slope than the area between A and B?
Answer:
Law of Diminishing Marginal Returns
What has to happen for a country to move from point E to B to D?
Answer:
The movement through which 3 points (out of 5 given) would indicate the largest increase in productivity?
Answer:
Chapter 6 Solutions
Macroeconomics (Fourth Edition)
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- Based on two period model: population growth results in a decrease in the relative amount allocated to the second period and a lower present value of the marginal user cost. True or False?arrow_forwardProblem 1 Consider the simple (one-period) production model. The production function is Cobb-Douglas, exhibits constant returns to scale, and the exponent on capital equals 0.25.arrow_forwardThe Black Death: (a) Wages were higher after the Black Death because of diminishing returns. Our production model exhibits diminishing returns to labor: each additional unit of labor increases output by less and less. So if the amount of labor is reduced, the marginal product of labor — and hence the wage — increases. The reason is that capital stays the same: each remaining worker is able to work with more machines, so his productivity rises. In fourteenth-century Europe, the marginal workers could move to better land and discard old broken-down tools. Graphically, this can be seen by considering the supply-and-demand diagram for labor in Figure 4.2(b). If the supply of labor shifts back (because a large number of workers die), the equilibrium wage rate increases. Draw this graph — including the shift in the labor supply curve — to see the result for yourself. Mathematically, the result can be seen in the solution for the wage rate in our production model,…arrow_forward
- List and discuss the two (2) main factors of economic growth according to the production possibility frontier model.arrow_forwardA key assumption in an endogenous growth model with both labour and capital inputs in the production function is that Multiple Choice O о о о O the share of capital is larger than the share of labour the share of capital and labour have to be equal better technology is a byproduct of more capital investment there are no external returns to capital long-run growth comes solely from technological progressarrow_forwardSuppose the per-worker production function is glven as follow. y= 6kh2/a, where k- (physical) capital per worker, h human capital per worker The economy is initially endowed with 280 units of (physical capital per worker and 250 units of human capital per worker. In the neighbourhood of the initial endowments of both physical and human capital, what will be the change in per-worker output when there is a small incremental change in human capital while holding all else constant lie, what is the marginal product of human capital)? Note: Keep your answer to 2 decimal places if needed. For example, if your answer is 1234.56. then enter 1234.56 in the answer box.arrow_forward
- 1. Over a period of 10,000 years, the population of Brobdingnag is estimated to have increased from 4 million to 170 million. Assuming that the level of income per worker was constant, there are only two factors of production, Land (X) and Labour (L), and the exponent on land in the production function is one-third, what was the annual growth rate of productivity, A? a) 0.17% b) 0.42% c) 0.03% d) 0.01%arrow_forwardConsider now the two-period model in general equilibrium, so that prices, investment, and labor supply are endogenous, i.e. the production economy. Analyze and carefully explain graphically and in words the general equilibrium effects of a decrease in TFP for a benchmark economy with no frictions.arrow_forwardWhat is the effect of an increase in total factor productivity on steady state population and consumption per worker in the Malthusian model?arrow_forward
- Specific Factors Model: Consider an economy with two goods – corn (C) and potatoes (P) – both produced using labor. The technologies for the two sectors are given by the following Cobb-Douglas production functions: 1-a Qc= Ac K“ Lc Qp = Ap T Lp'B Where 0arrow_forwardShow graphically on the same x and y axis what happens to this production function if there is a technological advancement in this economy. Don,t copy from anywhere.arrow_forwardIn a Heckscher-Ohlin model, if capital-owners are relatively better off, then it is consistent with the labour- capital amount (L/K) demanded becoming for the capital-intensive good. Paragraph v B I U ...arrow_forwardarrow_back_iosSEE MORE QUESTIONSarrow_forward_ios
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