Economics Answers

9. Consider a production function of an economy:

Y = BKαT βL1-α-β (1)

where Y = output, K = capital stock, T = land, L = labor, B = index

of exogenous technological change, and α and β are elasticities.

(a) Show that growth in output along the balanced growth path is

gY = g + (1 - β¯)n and that growth in output per capita is given

by gy = g - βn ¯ where g = gB/(1 - α), and β¯ = /(1 - α). [Hint:

Assume that land is fixed and exploit the stylized fact that capitaloutput ratio (K/Y ) is constant at steady-state].

(b) What is the long-run growth a function of?

(c) Suppose there is little or no technological advancement in the

economy. What is the fate of the economy with fixed land and a

population growing at a rate of n?

(d) Discuss how the Malthusian checks would operate on this type of

hypothetical economy.

(e) Discuss the implication of this model on economies dependent on

non-renewable natural resources.

(f) How does technology help break the impasse in this model?

8. Suppose the production function for a newly discovered product through

research is given by Y = 100(L-F) where Y = output of the new product, L = labor input, and F = fixed amount of labor input required

to invent the idea (cost incurred before the first unit of output can be produced). Assume that there is no production if L < F ; and each

unit of labor L costs a wage rate w.

(a) Find the cost function C(y) that represents the minimum cost

required to produce Y units of output.

(b) Given a price P which the firm faces for each unit of output produced, show that the firm cannot make profit and operate in perfectly competitive market settings.

Consider three of the stylized facts of economic growth: (i) there is a

sheer level of difference across countries in terms of level of income, (ii)

there are differences in long-run growth of economies in the world, and

(iii) economic positions of countries are not immutable.

(a) Discuss how the Solow growth model addresses the three stylized

facts.

(b) What are the major contributions of the Ramsey-Cass-Koopmans

model over the Solow model? How do they differ from the Solow

model in terms of their implications for the three stylized facts

above?

(c) What is the major shortcoming of the Solow growth model?

(d) The AK models are the first generation models in an attempt to

endogenize technology. Why are they still categorized as neoclassical growth models?

(e) Whose works mainly constitute the AK models?

(f) Briefly discuss how theories of expanding varieties, quality ladder,

and technological transfer attempt to fill the gaps in the neoclassical growth model in addressing the three stylized facts?

Consider two small open economies A and B which opted to adopt a

floating exchange rate regime, and a fixed exchange rate regime, respectively. While Country A wants to exercise fiscal policy, Country B

wants to exercise monetary policy.

(a) What are the possible reasons for Country A to adhere to exercising fiscal policy instead of monetary policy?

(b) According to the Mendel-Fleming model and the monetary approach to the balance of payment, what should be the position

of Country A on the policy of liberalizing its (foreign) capital account, i.e. capital mobility? Discuss the reason.

(c) What should be the position of Country B on the policy of liberalizing its (foreign) capital account, i.e. capital mobility? Discuss

the reason.

What is the basic difference between cardinal and ordinal approaches of utility?

The estimated production of an organisation is 500000 units. The standard man hours required to produce each unit is 5 hours. The past experience show that the workability of each employee in a man hours is 2000 hours per year . How many workers are required to produce estimated units

Which of the following is incorrect statement? *

Engineering Economics assesses economic viability of alternative feasible engineering alternative

Engineering economic solves the problem of uncertain future

Engineering economics supplements the task of accountant

Engineering economics reveals which cost and benefits need to be taken unto account in a specific case

Beatrice Luigi Gomez established a fashion designing service business in Cebu city on December 2021 which she named top 5 best designs set up the following ledger account using T-account and post all the journal entries?

It has been reported that the world demand for chocolate is increasing at a time when the supply of cocoa beans, the raw ingredient required to produce chocolate, is not as large as expected. Explain, with the help of a diagram, the likely effects of these changes on the world market for chocolate products. 

Very high consumption of chocolate can lead to health problems such as obesity and diabetes, especially amongst young children in developed economies.  Discuss what is likely to be the most effective policy to reduce

these problems.