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1

Diminishing marginal productivity has the same implications for economic growth as decreasing returns to scale.
A)True
B)False
2

Growth occurs when:
A)output rises.
B)potential output rises.
C)employment rises.
D)resources are employed more efficiently.
3

The Rule of 72 implies that a country with a growth rate of 8 percent will double its income in:
A)4 years.
B)6 years.
C)9 years.
D)12 years.
4

The Rule of 72 implies that a country will double its income in 4 years if its growth rate is:
A)8 percent.
B)12 percent.
C)18 percent.
D)25 percent.
5

Per capita growth:
A)occurs when the population is growing.
B)occurs when output is growing.
C)occurs when there is an increase in goods and services per person.
D)improves the distribution of income.
6

One reason market economies have been so successful in promoting growth is that
A)market economies have promoted monopolies, a necessary ingredient to growth.
B)people have worked selflessly to see that everyone has more.
C)government has successfully directed resources into productive activities.
D)economic incentives exist for individuals to gain from increased production.
7

Use the following table to answer the question.
Units of
Capital
Units of
Labour
Units of
Output
1050500
201002000
301504500
402008000
According to the table, production is characterized by:
A)diminishing marginal productivity.
B)decreasing returns to scale.
C)constant returns to scale.
D)increasing returns to scale.
8

Classical economists predicted that population growth would eventually reduce economic growth because they believed:
A)in the law of diminishing marginal productivity.
B)in the law of increasing marginal productivity.
C)that production involved decreasing returns to scale.
D)that production involved increasing returns to scale.
9

Classical growth economists who applied the law of diminishing marginal productivity to capital concluded that:
A)both output and per capita output could grow indefinitely.
B)output could grow indefinitely but per capita output could not.
C)per capita output could grow indefinitely but output could not.
D)neither output nor per capita output could grow indefinitely.
10

The law of diminishing marginal productivity:
A)always applies.
B)applies only when learning by doing is not present.
C)may apply even when learning by doing is present.
D)no longer applies.







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