Tutorial Questions for Week 1
Written Questions
Question 1
1.1 What is meant by a “hockey stick” growth trajectory? Over numerous centuries,
can it be shown that a “hockey stick” growth trajectory is applicable to both GDP
growth and the growth of inequality?
1.2 The flat part of the hockey stick was explained by a theory known as the
Malthusian Trap. Briefly outline this the theory of the Malthusian Trap.
1.3 Briefly explain how economies escaped from the Malthusian Trap.
Question 2
2.1 Draw a correctly labelled Malthusian production function with diminishing
marginal returns, which goes through the origin as well as through point A, where
500 farmers produce 225 000 kg of grain, and point B, where 700 farmers produce
280 000 kg of grain.
2.2 Calculate the Average Product of Labour at point A and the Average Product of
Labour at point B.
2.3 Explain what happens to total output and average output in the Malthusian model
as the number of farmers increases. As a result what does the Malthusian model
predicts will happen to living standard as the population increases.
MCQ’s
1. Which of the following statements is / are correct with regard to Gross
Domestic Product (GDP)?
i. GDP includes the value of all products that are consumed even if they are
not produced, such as, the value of clean air.
ii. GDP includes the value of housework as a proxy value for the work done
in social reproduction.
iii. Adjusting GDP using Purchasing Power Parity prices allows the
comparison of GDP levels between different countries.
iv. Adjusting GDP using Purchasing Power Parity prices corrects for a
situation where GDP levels in low income countries would be overstated.
v. Nominal GDP and Real GDP will be identical if the rate of inflation is low.
A. Only (i), (iii) and (iv) are correct.
B. Only (ii) and (iii) are correct.
C. Only (iii) is correct.
D. Only (iii) and (iv) are correct.
E. Only (v) is correct.
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2. A country, Wakanda, produces two output goods: loaves of bread and
handbags. In 2016 the prices of loaves of bread were $5 and $40
respectively. In 2017, the prices increased to $6 and $45. The quantities
produced of the two goods were 1000 and 200 respectively in both 2016 and
2017. From this information we can conclude that:
i. The nominal GDP of Wakanda in 2016 was $13000
ii. The real GDP of Wakanda is unchanged between 2016 and 2017.
iii. The nominal GDP of Wakanda is unchanged between 2016 and 2017.
iv. The nominal GDP growth rate between 2016 and 2017 is 15,38%
v. The economy of Wakanda grew between 2016 and 2017 in both nominal and
real terms.
A. Only (i) and (ii) are correct.
B. Only (i), (ii) and (iii) are correct.
C. Only (i), (ii) and (iv) are correct.
D. Only (iii) and (v) are correct.
E. Only (i), (iv) and (v) are correct.
3. In a choice of technology model with labour and electricity inputs, if there is a
relative increase in the price of labour compared to the price of electricity,
which of the following statements is / are correct?
i. If the relative price of labour rises, labour-intensive technologies will be
favoured.
ii. If the relative price of labour rises, electricity-intensive technologies will be
favoured.
iii. Entrepreneurs who are early adopters of more electricity-intensive
technologies will earn an innovation rent.
iv. Those firms that favour labour-intensive technologies will earn an
innovation rent.
v. Through a process of diffusion labour-intensive technologies would be
expected to spread to other producers.
A. Only (i) and (v) are correct.
B. Only (ii) and (iii) are correct.
C. Only (ii) and (iv) are correct.
D. Only (i) and (iii) are correct.
E. Only (v) is correct.
4. In the following diagram there are two technologies, A and B, which can
produce 100 tons of steel. There are two price scenarios. In Scenario 1
(dotted line), the wage and the coal price are £10 and £20 respectively. In
Scenario 2 (solid lines), the coal price drops, and the wage and the coal price
are £10 and £5 respectively. Based on the information provided, which of the
following are correct.
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i. At point J, 4 tonnes of coal are required to produce 100 tonnes of steel and
the total cost is £80.
ii. At point M, 5 workers are used to produce 100 tonnes of steel and the total
cost is £80.
iii. When the coal price drops, at point B the cost of producing 100 tonnes of
steel falls from £80 to £40.
iv. When the coal price drops, at point B the cost of producing 100 tonnes of
steel falls from £80 to £50.
v. The drop in the coal price means that coal-intensive technologies become
favoured as lowest cost, such as at point A.
A. Only (i) and (ii) are correct.
B. Only (i), (ii) and (iii) are correct.
C. Only (i) and (iv) are correct.
D. Only (iii) and (v) are correct.
E. Only (i), (iv) and (v) are correct.
5. Which of the following statements regarding Malthusianism is / are correct?
i. Malthus held that a sustained increase in income per capita would be
possible due to permanent technological improvements.
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ii. According to Malthusianism, any technological change or rise in
productivity of labour would be offset by population growth.
iii. Malthus’s theory was useful in explaining the sustained improvement in
living standards that resulted from the capitalist revolution.
iv. Malthusianism provided an explanation of why income remained constant
over centuries without trending upwards.
v. According to the Malthusian production function, the level of output
increased at a constant rate as additional units of labour participated in
production on a fixed quantity of land.
A. Only (i) and (iii) are correct.
B. Only (ii)and (v) are correct.
C. Only (iii) is correct.
D. Only (ii) and (iv) are correct.
E. Only (ii), (iii) and (v) are correct.