Answer to Question #283640 in Economics for Sal

Question

Chose the best answer to each question

The market-friendly approach to development

emphasizes

(a) self-interested behavior of public officials in

LDCs.

(b) the dependence of LDCs on former colonial

powers.

(c) the inherent efficiency of markets in developing

countries.

(d) that markets in LDCs fail sometimes and non-

selective interventions can

promote economic development.

For an economy's output function »- {k)-VE

where y=(Y/L) and k = (K/L), which of the following

statements is correct?

(a) In this economy, the average productivity of

capital is constant for all k.

(b) The output function is subject to constant returns

to scale.

(c) In this economy, labor and capital are not

substitutable.

(d) The economy's total factor productivity is equal to

O.

In a steady-state economy with no population

growth, capital per worker is 80, the saving rate is

25 percent, and the depreciation rate is 12.5

percent. The level of output per worker is

(a) 195

(b) 38

(c) 40

(d) 47

Answer 1

1. The market-friendly approach, which suggests that, while markets work, they sometimes fail to emerge, and a government has an important role in compensating for three main market failures: missing markets, imperfect knowledge and externalities.

So, the correct answer is (d).

We need to know the correct production function to answer this question.

The level of output per worker is:

80×0.125/0.25 = 40.

So, the correct answer is (c).