1. The rise in average living standards experienced by most industrialized countries: 

A. has been continuous over the course of human history.

B. was more rapid before 1870 than after 1870.

C. has been more rapid since 1950 than before 1950.

D. has resulted primarily from an increase in population worldwide.


2. Real GDP per person in the United States was $9,864 in 1950. Over the next 48 years, it grew at a compound annual rate of 2.0%. If, instead, real GDP per person had grown at an average compound annual rate 2.5%, then real GDP per capita in the United States in 1998 would have been approximately ______ larger. 

A. $3,420

B. $6,750

C. $9,900

D. $25,500


3. In 1998, average labor productivity in the U.S. was $66,381 per worker and 48.9% of the population was employed. What is the per capita GDP in 1998? 

A. $33,921.

B. $32,460.

C. $66,381.

D. cannot be determined.


4. Growth in the share of population employed in the United States is likely to decline in the future because: 

A. increasing female labor force participation is predicted.

B. increasing male labor force participation is predicted.

C. population growth is expected to increase.

D. an increasing proportion of those currently employed will be retiring.


5. Which of the following is an example of investing in human capital? 

A. A firm replaces manually controlled production with a computer controlled procedure.

B. A firm pays for workers to take college classes.

C. A chemical firm supports research to develop new chemicals.

D. A firm purchases new equipment for a manufacturing process.

E. All of the above.


6. Mike and Tom debone chicken breasts for Ted's Chicken Co. Mike is new and can only debone 30 chicken breasts per hour by hand, while Tom's experience allows him to debone 60 chicken breasts per hour by hand. Ted buys one new machine that can debone 100 chicken breasts per hour. Both Mike and Tom work the same 40 hours per week, but one of them is assigned to operate the machine instead of deboning the chicken breasts by hand. To obtain maximum average hourly productivity, ____ is assigned to use the machine and their combined average hourly productivity as a team is ____ chicken breasts 

A. Mike; 65

B. Mike; 80

C. Tom; 65

D. Tom; 100


7. Based on the table below, if the production process described below is subject to diminishing returns to capital, then total packages wrapped when a fourth machine is installed must be less than _____ packages.





A. 2,000

B. 15,000

C. 16,000

D. 17,000


8. Most economists agree that ______ is/are the single most important source of productivity improvements. 

A. increases in human capital

B. increases in physical capital

C. technological advances

D. discoveries of natural resources


9. Entrepreneurs contribute to increased average labor productivity in each of the following ways EXCEPT by: 

A. introducing new production methods.

B. implementing new technological processes.

C. developing new products.

D. assigning workers to jobs.

10. The productivity slowdown of the 1970's occurred: 

A. only in the U.S.

B. only in the U.S. and the United Kingdom.

C. only in the U.S, the United Kingdom, and Japan.

D. around the world.

11. High rates of saving and investing in the private sector promote economic growth by: 

A. increasing human capital.

B. improving the social and legal environment.

C. increasing physical capital.

D. improving technology.

12. Empirical studies indicate that the maximum amount of air pollution occurs _______ levels of real GDP per person. 

A. at the highest

B. at the lowest

C. at intermediate

D. equally at all


13. International data on the relationship between the amount of capital per worker and average labor productivity indicates strong positive relationship between the two variables for developing and less developed nations and a much weaker relationship between the two variables for richer nations.  A possible explanation for this is: 

A. diminishing returns to physical capital

B. larger populations putting pressure on limited natural resources in poorer nations

C. low human capital accumulation in poorer nations

D. none of the above.


14. Governments contribute to increased average labor productivity in each of the following ways EXCEPT by: 

A. establishing well-defined property rights.

B. maintaining political stability.

C. imposing taxes on wages.

D. allowing the free and open exchange of ideas.


15. The costs of economic growth include current consumption sacrificed for:  

A. physical capital formation.

B. acquiring new human capital.

C. research and development into new technologies.

D. all of the above.