Chapter 24 QTR’s & PE’s

Question For Thought And Review

1. If you suddenly found yourself living as a poor person in a developing country, what are some things that
you now do that you would no longer be able to do? What new things would you have to do? Answer the
question again assuming you are living in the United States 100 years ago.

2. Who most likely worked longer to buy a dozen eggs: a person living in 1900 or a person living in 1910?
Why?

9. On what law of production did Thomas Malthus base his prediction that population growth would exceed
growth in goods and services? Why haven’t his predictions come true

10. If individuals needed more food to subsist, what would the Classical growth model predict would
happen to labor and output? Demonstrate graphically.

14. In what ways can competition promote technological advance? In what way can competition harm
technological advance?

16. Explain Why communities are willing to give tax relief to new-technology firms that locate in their
community

Problems And Exercises

1. Income in the world economy grew an average of 2% per year in 1950. If this growth continues, how
many years will it take for income to double?

2. If output increases by 20% when on of the two inputs increases by 20%, are there constant returns to scale?
Why of why not?

4. Calculate real growth per capita from 1994 to 2003 in the following countries:
a. Democratic Republic of Congo: population growth = 3.0%; real output growth = -1.8%
b. Estonia: population growth = -0.4%; real output growth = 4.2%
c. India: population growth = 2.0%; real output growth = 6.0%
d. United States: population growth = 0.5% growth; real output growth = 2.5%

7. The graph below shows a production function and the subsistence level out output.
a. Does the production function exhibit increasing or decreasing marginal productivity?

b. Label a level of population at which the population is expected to grow. What is the surplus
output at that population level?

c. Label a level of population at which the population is expected to decline. Why is population
declining at this point?

d. Label the point at which the economy is in a steady state. Why is this a steady state?