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In the Romer model, the more labor you dedicate to generating ideas, the slower you accumulate knowledge, but at a loss to current output in the consumption sector.

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The reason perfect competition cannot generate new ideas is that:


A) profits are positive.
B) perfectly competitive firms have no ideas.
C) profits are zero.
D) firms are too small to generate ideas.
E) revenues are positive.

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In the combined Solow-Romer model, long-run growth is sustained because of:


A) population growth.
B) capital accumulation.
C) the nonrivalry of ideas.
D) total factor productivity.
E) no capital depreciation.

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You have been asked to calculate TFP growth for four countries from 1985-2014: China, Hungary, South Korea, and Mexico. You decide to reach for the Solow growth model to do your calculations, specifically, the Cobb-Douglas production function: You have been asked to calculate TFP growth for four countries from 1985-2014: China, Hungary, South Korea, and Mexico. You decide to reach for the Solow growth model to do your calculations, specifically, the Cobb-Douglas production function: . Using the data available in the table below, which shows the average labor share and growth rates of real GDP per capita, labor composition, and capital per capita from 1985-2014, find the TFP growth rate for each country. Given what you know about each country, what may explain your results?Table 6.3 (Source: Penn World Tables 9.0) . Using the data available in the table below, which shows the average labor share and growth rates of real GDP per capita, labor composition, and capital per capita from 1985-2014, find the TFP growth rate for each country. Given what you know about each country, what may explain your results?Table 6.3 You have been asked to calculate TFP growth for four countries from 1985-2014: China, Hungary, South Korea, and Mexico. You decide to reach for the Solow growth model to do your calculations, specifically, the Cobb-Douglas production function: . Using the data available in the table below, which shows the average labor share and growth rates of real GDP per capita, labor composition, and capital per capita from 1985-2014, find the TFP growth rate for each country. Given what you know about each country, what may explain your results?Table 6.3 (Source: Penn World Tables 9.0) (Source: Penn World Tables 9.0)

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We first note that the second column, la...

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If there are large fixed costs due to research and development, perfect competition does not generate new ideas because:


A) firms need to recoup these costs through higher profits.
B) with monopolistic competition, prices are equal to the marginal cost.
C) with monopolistic competition, prices are equal to the marginal cost minus a markup.
D) perfectly competitive firms always set prices lower than the marginal cost.
E) the government does not adequately fund innovation.

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According to the Case Study on Globalization and Ideas in the text, in ________ there are about ________ for every phone landline in the region.


A) sub-Saharan Africa; 10 cell phones
B) Southeast Asia; 0.5 computers
C) the Indian subcontinent; five pagers
D) Latin America; two cars
E) eastern Europe; three modems

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Even if there are decreasing returns to the ideas stock in the knowledge sector, the Romer model:


A) cannot explain sustained growth.
B) can explain an economy that reaches its steady state.
C) can explain sustained growth.
D) cannot explain why economies' saving rates differ.
E) cannot explain why the output sector exhibits decreasing returns.

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Consider the following data: Consider the following data: Note: Total R&D/GNP is the share of research and development in gross national product share. Define the percentage of science and engineering students as a representation of in Romer's model. All things being equal across all countries, which country does the Romer model predict will grow the fastest? Explain. Note: Total R&D/GNP is the share of research and development in gross national product share. Define the percentage of science and engineering students as a representation of Consider the following data: Note: Total R&D/GNP is the share of research and development in gross national product share. Define the percentage of science and engineering students as a representation of in Romer's model. All things being equal across all countries, which country does the Romer model predict will grow the fastest? Explain. in Romer's model. All things being equal Consider the following data: Note: Total R&D/GNP is the share of research and development in gross national product share. Define the percentage of science and engineering students as a representation of in Romer's model. All things being equal across all countries, which country does the Romer model predict will grow the fastest? Explain. across all countries, which country does the Romer model predict will grow the fastest? Explain.

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In the Romer model, the growth...

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Which of the following can be used to give firms incentive to innovate?


A) patents
B) copyrights
C) prizes
D) subsidies
E) All of these answers are correct.

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The production function The production function , where A<sub>t</sub> is the stock of ideas, K<sub>t</sub> is capital, and L<sub>t</sub> is labor, assumes that A<sub>t</sub> is rivalrous. , where At is the stock of ideas, Kt is capital, and Lt is labor, assumes that At is rivalrous.

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In the Romer model, output is increasing in the ________ and decreasing in the ________.


A) saving rate; depreciation rate
B) research share; growth rate of knowledge
C) growth rate of knowledge; fraction of population in the ideas sector
D) growth rate of knowledge; depreciation rate
E) saving rate; growth rate of knowledge

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Consider the production function Consider the production function , where Y is output and X represents inputs. Graph this production function. Does it display decreasing, constant, or increasing returns to scale? , where Y is output and X represents inputs. Graph this production function. Does it display decreasing, constant, or increasing returns to scale?

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This is an alternative production functi...

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In the Romer model, the growth rate of ideas, In the Romer model, the growth rate of ideas, , is increasing in the: A) share of the population doing research and the total population. B) knowledge efficiency parameter and the population growth rate. C) knowledge efficiency parameter, the research share, and the total population. D) knowledge efficiency parameter and the saving rate. E) share of population engaged in research and development and the saving rate. , is increasing in the:


A) share of the population doing research and the total population.
B) knowledge efficiency parameter and the population growth rate.
C) knowledge efficiency parameter, the research share, and the total population.
D) knowledge efficiency parameter and the saving rate.
E) share of population engaged in research and development and the saving rate.

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In economics, a nonrival good is one that:


A) cannot be consumed by more than one person at a time.
B) can be consumed by more than one person at a time.
C) can be consumed by more than one person at a time but is congested.
D) cannot be consumed by more than two people at a time.
E) None of these answers is correct.

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Suppose the parameters of the Romer model take the following values: Suppose the parameters of the Romer model take the following values: And What is the per capita income of this country in the initial period, y<sub>0</sub>? A) about 12.1 B) about 11.9 C) about 12.0 D) about 1.19 E) about 9.9 Suppose the parameters of the Romer model take the following values: And What is the per capita income of this country in the initial period, y<sub>0</sub>? A) about 12.1 B) about 11.9 C) about 12.0 D) about 1.19 E) about 9.9 And Suppose the parameters of the Romer model take the following values: And What is the per capita income of this country in the initial period, y<sub>0</sub>? A) about 12.1 B) about 11.9 C) about 12.0 D) about 1.19 E) about 9.9 What is the per capita income of this country in the initial period, y0?


A) about 12.1
B) about 11.9
C) about 12.0
D) about 1.19
E) about 9.9

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Suppose the parameters of the Romer model take the following values: Suppose the parameters of the Romer model take the following values: And What is the per capita income of this country in the 10th period, y<sub>10</sub>? A) about 6.13 B) about 61.3 C) about 12.0 D) about 11.9 E) about 10.9 Suppose the parameters of the Romer model take the following values: And What is the per capita income of this country in the 10th period, y<sub>10</sub>? A) about 6.13 B) about 61.3 C) about 12.0 D) about 11.9 E) about 10.9 And Suppose the parameters of the Romer model take the following values: And What is the per capita income of this country in the 10th period, y<sub>10</sub>? A) about 6.13 B) about 61.3 C) about 12.0 D) about 11.9 E) about 10.9 What is the per capita income of this country in the 10th period, y10?


A) about 6.13
B) about 61.3
C) about 12.0
D) about 11.9
E) about 10.9

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In perfect competition, the price is ________; in a monopoly, the price is ________.


A) zero; positive
B) greater than the marginal cost; equal to the marginal cost
C) less than the marginal cost; greater than the marginal cost
D) equal to the marginal cost; greater than the marginal cost
E) positive; zero

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In the Romer model, with decreasing returns to the knowledge sector:


A) the transition dynamics appear very similar to those in the Solow model.
B) an increase in the research share decreases the growth rate in the short run.
C) an increase in the research share increases the growth rate in the short and long runs.
D) a decrease in the research share increases the growth rate in the short run.
E) There are no level effects.

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Labor composition is used in "growth accounting" because it:


A) includes total number of hours worked.
B) can include changes in the age distribution of the labor force.
C) can include the educational attainment in the labor force.
D) includes the total number of workers.
E) All of these answers are correct.

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Figure 6.2: Romer Model: Per Capita Output Figure 6.2: Romer Model: Per Capita Output -In the ideas sector production function, , there are: A) increasing returns to the ideas stock but decreasing returns overall. B) decreasing returns to the ideas stock but increasing returns overall. C) decreasing returns to the ideas stock and labor. D) increasing returns to the ideas stock and labor. E) None of these answers is correct. -In the ideas sector production function, Figure 6.2: Romer Model: Per Capita Output -In the ideas sector production function, , there are: A) increasing returns to the ideas stock but decreasing returns overall. B) decreasing returns to the ideas stock but increasing returns overall. C) decreasing returns to the ideas stock and labor. D) increasing returns to the ideas stock and labor. E) None of these answers is correct. , there are:


A) increasing returns to the ideas stock but decreasing returns overall.
B) decreasing returns to the ideas stock but increasing returns overall.
C) decreasing returns to the ideas stock and labor.
D) increasing returns to the ideas stock and labor.
E) None of these answers is correct.

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