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Unformatted text preview: Quiz # 1 Answers 1. C - Increases in capital and machinery, not fewer capital goods, improve the labor productivity in an economy 2. B - With higher productivity and hence higher standard of living, there will be an increase in demand for leisure which is a normal good. Hence higher real earning ability per hour may actually lead to shorter work week. Similarly, higher labor productivity leads to higher standard of living, hence an increased demand for clean air and improved environmental results (long term effect). Higher unemployment rates may occur only in the short run. 3. E - The % change in labor productivity is = Q% - L% where L% is the percentage change in labor employment. Therefore, % change in labor productivity = 2.5% - (-.5%) . Thus, %change in productivity = 3% 4. D - The PPF is: 1/2*Fish + 2 * Nets + 1/3 * Fences = 6 or multiplying both sides by 6:...
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- Winter '08