Question 1

According to the Malthusian model, what typically happens after a short-term increase in per capita income in an agricultural society?

Accepted Answer

The population begins to grow, eventually causing per capita income to return to its previous level.

Question 2

Which of the following events is most likely to cause a temporary increase in per capita income according to the Malthusian model?

Accepted Answer

The outbreak of a plague that significantly reduces the population.

Question 3

In the context of the Malthusian model, what is the long-term effect of a plague that reduces the population but leaves land and technology unchanged?

Accepted Answer

Per capita income rises temporarily, but population growth eventually returns it to its previous level.

Question 4

Given the following technologies for coal production, which technology is dominated by another? Technology A: 2 workers, 4 tons; Technology B: 3 workers, 4 tons; Technology C: 5 workers, 5 tons; Technology D: 4 workers, 3 tons; Technology E: 7 workers, 3 tons.

Accepted Answer

Technology B is dominated by Technology A.

Question 5

If the slope of the isocost line is $-3$, meaning the wage rate is three times the price of coal, which technology would a cost-minimizing firm choose?

Accepted Answer

Technology A, because it uses the least labor for the same output.

Question 6

Suppose the wage rate falls and the slope of the isocost line changes to $-1/2$. Which technology becomes optimal for a cost-minimizing firm?

Accepted Answer

Technology C, because labor is now relatively cheap.

Question 7

What does a steeper isocost line (in absolute value) indicate about the relative prices of labor and coal?

Accepted Answer

Labor is relatively more expensive compared to coal.

Question 8

In the context of the Industrial Revolution, why did British firms in the 18th century prefer technologies that substituted coal for labor?

Accepted Answer

Because wages in England were high relative to the price of coal.

Question 9

Refer to the graph showing the ratio of wages to capital costs in England and France from 1580 to 1820. What does the upward trend in England's line after 1700 suggest?

Accepted Answer

Wages in England increased relative to capital costs, incentivizing labor-saving technologies.

Question 10

Why did the technical revolution occur in England in the 18th century and not in France, according to the wage-to-capital cost graph?

Accepted Answer

England had a higher wage-to-capital cost ratio, making innovation in labor-saving technology more profitable.

Question 11

If a firm faces the isocost equation $wL + pC = K$ where $w$ is wage, $L$ is labor, $p$ is price of coal, $C$ is coal, and $K$ is total cost, what happens to the isocost line if $w$ increases while $p$ and $K$ remain constant?

Accepted Answer

The isocost line becomes steeper (in absolute value), favoring coal-intensive technologies.

Question 12

Which of the following best explains the concept of a dominated technology in production theory?

Accepted Answer

A technology that requires more of every input to produce the same output as another technology.

Question 13

In the Malthusian model, which factor is most responsible for the return of per capita income to its previous level after a temporary increase?

Accepted Answer

Population growth that absorbs the surplus income.

Question 14

Suppose a country experiences a volcanic eruption that reduces soil fertility. According to the Malthusian model, what is the likely long-term effect on per capita income and population?

Accepted Answer

Both per capita income and population decrease.

Question 15

If the price of coal falls relative to wages, how does this affect the optimal choice of technology for a firm?

Accepted Answer

Firms will choose technologies that use more coal and less labor.

Question 16

Which of the following scenarios best illustrates the application of the isocost line in a real-world context?

Accepted Answer

A factory manager chooses between different production methods based on the relative costs of labor and energy.

Question 17

If a firm can choose between Technology A (2 workers, 4 tons coal) and Technology B (3 workers, 4 tons coal), and the wage rate is higher than the price of coal, which technology should the firm choose?

Accepted Answer

Technology A, because it uses less labor.

Question 18

What does the intersection point of an isocost line and a technology point on a graph represent?

Accepted Answer

The total cost of producing a given output with that technology.

Question 19

Why did the technical revolution occur in England in the 18th century according to the cost structure shown in the graphs?

Accepted Answer

Because the high wage-to-capital cost ratio made labor-saving, coal-intensive technologies profitable.

Macroeconomic Models: Malthusian Theory, Technological Choice, and Industrial Revolution

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