Quiz_222 - SHORTANSWER. 64 ,evenif .Provideagraphofaper-worker productionfunctiont

# Quiz_222 - SHORTANSWER. 64 ,evenif...

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SHORT ANSWER. Write the word or phrase that best completes each statement or answers the question. 64) Explain how advances in technology are critical to sustaining economic growth, even if capital per hour worked is consistently increasing. Provide a graph of a per-workerproduction function to support your answer.64)Answer: As the level of capital per hour worked increases, an economy moves along theper-worker production function toward higher levels of real GDP per hour worked.However, diminishing returns imply that successive increases in capital per hourwork increase real GDP per hour worked at a decreasing rate. As shown in thegraph below, moving from pointAto pointBimplies an increase in capital per hourworked. As a result, real GDP per hour worked increases from \$780 to \$800 (anincrease of \$20). Moving from pointBto pointCimplies a similar increase incapital per hour worked, but real GDP per hour worked increases from \$800 to \$810(an increase of only \$10). Without technological change that shifts the per-workerproduction function upward, continual growth in real GDP per hour workedcannot be sustained even if capital per hour worked continues to increase.Diff: 2Page Ref: 719-720/313-314Topic: Per-Worker Production FunctionLearning Outcome: Macro 4: Explain the sources of productivity growthAACSB: Analytic Skills16
65) Starting at pointBin the diagram below, identify which combinations of points illustratetechnological change. Give a brief explanation to support your answer.65)Answer: The movement fromBtoDin the diagram illustrates technological change.Technological change is constant along a given production function. Technologicalchange will shift the production function up as more output is produced (\$17,000GDP per hour vs. \$16,000 GDP per hour) with the same amount of capital per hourworked (\$60,000).

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• Spring '11
• Lee
• Economics, Prime number, AACSB, Page Ref

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