Chapter 22

What are the major factors of production?

Does efficient production assume that perfect knowledge exists? Explain.

What are the distinguishing characteristics of a capital good that differentiate it from the other factors of production ? As an aid to production , what are its relative risks?

Assume that the capital/output ratio is $2.$ From a present level of $\mathrm{\$}600$ million, GNP increases in the coming 10 years, by $2,6,4,5,6,6,3,5,2$, and 0 percent, in the respective years. How could the investments be expected to behave in those 10 years?

If the capital/output ratio is $2.5$, and GNP rises from $\mathrm{\$}985$ billion to $\mathrm{\$}1,055$ billion, by how much can investment be expected to increase, assuming no depreciation? Also, if the marginal propensity to consume is $0.5$, what will be the extra changes in GNP induced by the original rise?

Characterize and differentiate capital widening from capital deepening

What is meant by the marginal product of a productive factor?

Distinguish between the diminishing returns to a factor input and diminishing returns to scale.

What are the major determinants of productivity increases? Briefly describe each.

Why do economists stress the cross-elasticities between different factors of production?