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2/28/22Principles of Microeconomics - Rashid Memon & Rimsha ArifSpring 2022Midterm ExamExam Time:8 am – 8:45 amScan and Upload Time:9:00 amTotal:86 marksInstructions: Please write legibly and be succinct. This exam consists of two questions.Q1) Consider the Malthusian model of stagnation (the model that explains why the world hadroughly constant GDP per-capita for a very long time).a)Writedownthemaincomponentsofthismodel.[8]b)Show how a positive technological shock leads, over time, to the same wage as before theshock.Pleaseshowhowthemodeladjustsovertime.[10]c)The production function in the model describes technology that, in Malthus’ viewcharacterized technology in his time. Let’s replace that technology with an “increasing-returns-to-scale technology” (just to see how models work). An increasing-returns to scaleproduction function has the following property – scaling input by a factor t will scale outputby a more than factor t. Doubling labor, for example, will more than double output. Draw theproductionfunction.

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